Sterling, short-term gilts yields fall after dovish BoE vote

LONDON, Feb 5 (Reuters) - Sterling and two-year gilt yields fell on Thursday after the Bank of England held rates steady in a surprisingly narrow vote and said it expected a future cut if inflation continued to slow.

The pound extended losses against the dollar after the decision, and was last down 0.8% at a near two-week low of $1.3542. GBP=D3.

UK short-dated two-year gilt yields - which reflect short-term interest rate expectations - slipped after the decision to a three-week low of 3.63%, down 9 basis points on the day.

UK 10-year gilt yields fell marginally and were last down 1.5 bps at 4.534%.

The blue-chip UK FTSE 100 FTSE pared some earlier losses after the decision, but still down 0.1% on the day.