UK bond yields and sterling dip after BoE holds rates at 3.75%

July 30 (Reuters) - UK bond yields and the pound fell slightly on Thursday after the Bank of England held interest rates at 3.75% as expected and said domestic conditions were likely reducing inflationary pressures.

Britain's two-year government bond yield, which is sensitive to BoE rate expectations, slightly extended its earlier fall to trade 7 basis points lower at around 4.38% GB2YT=RR.

Sterling GBP=D3 was last up 0.1% at $1.339, down very slightly from before the decision.

Six of the Bank's Monetary Policy Committee voted to hold rates, with three officials voting for a hike, one more than economists polled by Reuters had expected.

In updated forecasts, the BoE's central projection showed inflation rising to 3.2% later this year from a 15-month low of 2.6% in June.

That is a softer inflation outlook than in the Bank's last full forecasts in April, but similar to what it predicted in June.

"For now, the Bank is not seeing enough to abandon its wait-and-see approach," said Schroders senior economist George Brown.

"Despite the sharp rise in energy prices, the majority appear unconvinced this will translate into more persistent domestic inflation."

London's FTSE 100 stock index, which hit a record high earlier on Thursday, was last up 0.2%.