MANILA, Philippines - The Philippine central bank kept its key interest rate unchanged in a policy meeting Thursday in line with market expectations.

It held the overnight borrowing rate at 4%, but cut the budget for short-term money under a peso rediscounting facility to P40 billion ($875 million) from P60 billion.

Central bank Deputy Governor Diwa Guinigundo said at the weekend authorities would not raise interest rates yet even though core inflation ticked up in February.

All 16 economists polled by Reuters this week had expected no change in the policy rate.

Expectations for the first rate rise have been shifting back as the central bank has maintained inflation would be within expectations, suggesting it is in no rush to tighten policy.

In the Reuters poll, half expected the first rate rise in the second quarter and half in the third quarter. Before the previous rate meeting on January 28, two-thirds of those polled expected the first rate rise in the second quarter.

The central bank began unwinding crisis-driven liquidity measures in January, raising by 50 basis points to 4% the rate for lending short-term money under a peso rediscounting window.

Last week, Guinigundo said average inflation in 2010 may come in at 4%, below the central bank's forecast of 4.7%. He said it was too early to say when the central bank would raise rates.

The central bank slashed rates by a total of 200 basis points between December 2008 and July 2009 to soften the blow of the global recession.