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UPDATE 1-Philippine cbank pauses easing as signs of economic recovery emerge

* Benchmark rate kept steady at record-low 2.25%

* Cbank sees signs of recovery in economic activity

* Cbank relaxes limit to real estate lending

* GRAPHICS: Philippines economy indicators interactive tmsnrt.rs/2nZqDWx (Adds comments, more details, graphic)

MANILA, Aug 20 (Reuters) - The Philippine central bank kept its policy rates steady on Thursday, saying there was no compelling reason for a further reduction as it saw signs of a rebound in economic activity with the gradual easing of coronavirus lockdowns.

It maintained the rate on the overnight reverse repurchase facility at a record-low 2.25%. Rates on the overnight deposit and lending facilities were likewise kept steady at 1.75% and 2.75%, respectively.

Thirteen out of 15 institutions surveyed by Reuters had expected the Bangko Sentral ng Pilipinas (BSP) to pause monetary easing after slashing rates by 175 basis points this year, while two had predicted a 25-50 bps cut.

“The Monetary Board’s decision was based on its assessment that the inflation environment remains benign,” BSP Governor Benjamin Diokno, reading a prepared statement at a virtual media briefing.

The central bank revised up its average inflation forecasts to 2.6% for this year, from 2.3% previously, and to 3% for next year, from 2.6%, still well within the 2%-4% target range for both years.

“At the same time, the Monetary Board observed early signs of recovery in domestic economic activity with the gradual easing of lockdown restrictions, supported by ample liquidity in the financial system,” he said.

Such support was further bolstered with his announcement early in the day of an increase in real estate lending, giving big banks more leeway to finance the property sector as the country gradually eases lockdown restrictions.

The Philippine economy fell into recession for the first time in 29 years with a record slump in the second quarter, as strict virus containment measures hit businesses and consumers.

Mindful of the economic fallout from the restrictions, the government on Wednesday relaxed a lockdown in the capital and nearby provinces, allowing more businesses to resume operations even as new infections continue to rise.

The Southeast Asian country leads the region in the number of coronavirus infections, with cases of close to 180,000 and deaths of nearly 2,900.

Diokno said the the recent rate cuts and other monetary and regulatory relief measures needed time to fully work their way through the economy.

However, he reiterated the BSP remains “committed to deploying its full range of instruments as needed”.

“The case for more easing is clear....The recovery looks set to be slow and fitful,” Alex Holmes, Asia economist at Capital Economics, said in a note to clients, predicting further policy rate cuts in coming months.

Lawmakers on Thursday approved a stimulus package worth up to 165 billion pesos ($3.39 billion).

Reporting by Neil Jerome Morales and Enrico Dela Cruz Editing by Ed Davies and Kim Coghill

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