(Updates throughout)

By Joice Alves

LONDON, March 21 (Reuters) - Sterling fell after the

Bank of England (BoE) on Thursday kept its benchmark interest

rate on hold as expected, while the Swiss franc fell to a

multi-month low after the Swiss National Bank (SNB) surprised

markets by cutting interest rates.

The BoE's interest rate-setters voted 8-1 to keep borrowing

costs at their 16-year high of 5.25% as the two officials who

had previously called for higher rates changed their stance.

Governor Andrew Bailey said there had been "further

encouraging signs that inflation is coming down" but he also

said the BoE needed more certainty that price pressures in the

economy were fully under control.

Sterling was last 0.3% lower on the day at $1.2742.

Against the euro, it fell 0.23% to 85.62 pence, after hitting an

almost three-week low.

"None of the nine MPC (Monetary Policy Committee) members

opted for a hike this time around, compared with two last time.

Markets took the news as dovish, with Gilts rallying and the

pound weaker," said Matthew Landon, Global Market Strategist at

J.P. Morgan Private Bank.

"Still, the BoE looks more likely to be in the 'late cutter'

camp. Even with recent progress that we have seen on price

pressures, the UK still looks to be a couple of steps behind the

rest of the world on their inflation battle."

The BoE's decision came a day after data showed inflation

fell to its lowest level in almost two-and-a-half years - even

if it remains higher than the bank wants.

Elsewhere, the Swiss franc fell sharply against the dollar

and sank to its weakest point since last July against the euro,

after the Swiss National Bank (SNB) unexpectedly cut rates.

The euro climbed against the Swiss franc to

0.978, the most since July 2023. It was last up 0.75% to 0.975.

Against the dollar, the Swiss franc fell 0.84% to

0.8943, after briefly hitting its lowest since November.

The SNB cut its main interest rate by 25 basis points to

1.50%, a surprise move which made it the first major central

bank to dial back tighter monetary policy aimed at tackling

inflation.

A majority of analysts polled by Reuters had expected the

SNB to keep rates on hold. It was the bank's first rate cut in

nine years.

"It's the first central bank in the developed world to ease,

so that shows the direction where the others are going," said

Jan Von Gerich, chief analyst at Nordea.

"The SNB was always the first likely mover, so this

shouldn't have an impact on what the others will do... But from

the markets' point of view, this does open the door to what

could happen elsewhere," he added.

The Norwegian crown steadied against the dollar,

after Norges Bank kept its rate unchanged, as expected.

The crown was 0.1% higher to 10.5480.

The Turkish lira rallied 0.8% to 32.13 against

the dollar after weeks of steady declines, as Turkey's central

bank unexpectedly raised its key interest rate by 500 basis

points to 50% on Thursday, citing a deteriorating inflation

outlook and pledging to keep a tight stance until there is a

significant and sustained drop in the trend.

The yen steadied against a strengthening dollar as it drew

some support from expectations of further rate hikes from the

Bank of Japan later this year and some jawboning efforts from

Japanese government officials.

The yen was last 0.1% higher on the day at 151.11,

after rallying in Asian trading hours and reversing some of its

heavy losses in the wake of this week's BOJ policy shift.

The dollar index rose 0.28% to 103.51 after falling

almost 0.5% on Wednesday.

In a week packed with central banks meetings, the Federal

Reserve on Wednesday maintained its projections for interest

rate cuts for the year in the face of upside surprises on

inflation, and did not strike a more hawkish tone as some

investors had feared.