UPDATE 1- Easing inflation gives Philippine scope to keep rates low

* Sept CPI up 4.8% y/y, below market forecasts

* Core inflation steadies at 3.3% y/y

* Cbank sees inflation within target by yearend (Adds details, comments)

MANILA, Oct 5 (Reuters) - Philippine inflation eased in September from a near three-year peak in the previous month, giving the central bank some room to maintain its policy support to ensure a sustained recovery for the economy.

The Consumer Price Index rose 4.8% from a year earlier, but slowed from 4.9% in August, mainly due to a slowdown in the transport index, government data showed on Tuesday.

The headline figure was at the low end of the central bank’s projected range of 4.8%-5.6% for the month, and below the 5.1% median forecast in a Reuters poll.

Core inflation, which excludes volatile food and fuel prices, remained at 3.3%.

Inflation averaged 4.5% in January-September, well above the year’s 2%-4% target band.

The Bangko Sentral ng Pilipinas (BSP) said inflation could remain elevated before decelerating to within the target by end-2021, and would settle close to the midpoint of the same target in 2022 and 2023.

In a statement, BSP Governor Benjamin Diokno reiterated the central bank’s resolve “to maintain its accommodative monetary policy stance for as long as the extent that the inflation outlook would allow”.

The BSP has kept its key interest rate at a record low here for the past seven consecutive policy meetings, saying monetary settings remained appropriate given manageable inflation and uncertain growth outlook.

“Cost-side pressures remain but the lower-than-expected inflation rate gives the Bangko Sentral some breathing space to keep rates untouched for a little longer,” said ING economist Nicholas Mapa.

The path to full recovery for Philippine economy, which came out of a pandemic-driven recession in the second quarter, remains unclear, with the recent reimposition of strict quarantine protocols prompting the government to lower its 2021 growth target.

Some economists believe the BSP will keep interest rates steady beyond 2021, but an elevated inflation has dimmed the prospect of further easing.

Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Muralikumar Anantharaman and Rashmi Aich