LONDON, Feb 5 (Reuters) - The Bank of England kept interest rates on hold on Thursday, but only after an unexpectedly narrow 5-4 vote, and it said it expected a future cut if a sharp fall in inflation due in the coming months proved not to be a blip.

Sterling fell after the decision and was last trading down 0.6% on the day at $1.357 GBP=, while British government bond yields fell GB2YT=RR, GB10YT=RR as traders ramped up rate-cut expectations.

London's FTSE-100 stock index was juSt 0.16% lower on the day .FTSE.

COMMENTS:

LEE HARDMAN, SENIOR CURRENCY ANALYST, MUFG, LONDON:

"The pound has sold off initially and that reflects the fact that the vote was obviously a lot closer than expected.

"It certainly looks a lot more dovish from the headlines than we had been anticipating… It certainly looks like we could get a cut as early as the next policy meeting."

JEREMY BATSTONE-CARR, EUROPEAN STRATEGIST, RAYMOND JAMES INVESTMENT SERVICES, FRANCE :

"Having cut the UK base rate six times in the current cycle, rate setters on the Bank of England's Monetary Policy Committee were wary of opting for a seventh easing. However, with inflation widely expected to fall sharply from April and settle at lower levels, the door certainly remains open to cuts in the near future.

"The key moment in the immediate future will be confirmation that regulatory and other price adjustments from April 2025 will drop out of annualised calculations this year. This should result in CPI inflation dipping below target sooner than the Bank anticipates, providing scope for easier policy in months to come."

JEREMY STRETCH, HEAD OF G10 FX STRATEGY, CIBC CAPITAL MARKETS, LONDON:

"We have another five-four split again. Clearly, that leaves Governor Bailey, once again, as the ultimate swing voter. He was the swing voter in December. One suspects that he may well prove to be the swing voter come March.

"We've long assumed that March was a live meeting and was underpricing.

"We've got twin problems for sterling today, obviously, with more rate cuts being priced and all the political risks. Normally, you would play certainly the political risk via cable, but I think ultimately, probably euro/sterling is the better way to play (the rate outlook)."

PHILIP SHAW, CHIEF ECONOMIST, INVESTEC, LONDON:

"The main feature of the meeting was that the result was closer than expected, with four members dissenting and voting for 25 basis points. We thought the would be a clear majority to keep policy on hold for the time being. A low inflation forecast has contributed towards easing some members’ concerns about inflation persistence, concluding that the degree of disinflation process is on track. Our forecast has been that the MPC would keep rates on hold until the end of April, but we wouldn’t be surprised if that cut is brought forward."

(Reporting by Reuters Markets Team; Compiled by Dhara Ranasinghe)

((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))