The central bank of the Philippines cut its key policy rate by 25 basis points to 3.50 percent, as expected by many economists, as low inflation gave Bangko Sentral ng Pilipinas (BSP) room to strengthen domestic activity while global economic prospects continue face considerable headwinds. BSP described the inflationary environment as"benign," saying forecasts indicate that inflation will remain on target from this year to 2014 and the risks to inflation are balanced. The central bank has now cut the rate on its key overnight borrowing, or reverse purchase facility, four times this year for a total reduction of 100 basis points. The overnight lending rate was also cut by 25 basis points to 5.50 percent. The Philippine inflation rate eased to 3.6 percent inSeptember from 3.8 percent and the BSP targets annual inflation of 3-5 percent. The central bank said it would closely monitor future price and output conditions, but did not give any further signal about the future move in interest rates. The Philippine economyexpanded by an annual 5.9 percent in the second quarter, down from 6.4 percent in the first, and thecentral bank said the domestic economy remained strong, but"additional policy support could help ward off the risks associated with weakerexternal demand by encouraging investment and consumption."