* BoE holds rates at 0.5 percent, keeps pumping money in
* UK rates not expected to rise until well into 2010
* No change in remuneration of bank reserves
By Christina Fincher
LONDON, Sept 10 (Reuters) - The Bank of England left interest rates at a record low of 0.5 percent for the sixth month running on Thursday and stuck with its programme of asset purchases to steer the economy towards recovery.
Most analysts had predicted the status quo after last month's shock decision to raise the amount of money the BoE is printing to support the economy -- quantitative easing -- by 50 billion pounds to 175 billion pounds.
But sterling gained and front month short sterling futures pared gains because some strategists had priced in an outside chance it would do more to stimulate an economy battered by its worst recession in decades.
The BoE's willingness to keep its foot on the monetary accelerator at a time of growing recovery optimism has set it apart from other central banks. The Bank of Korea signalled on Thursday that it could raise rates in the next few months and Australia, which narrowly avoided recession, is expected to hike before the end of the year.
Governor Mervyn King and two other policymakers had actually wanted to raise Britain's quantitative easing target to 200 billion pounds last month and analysts said the Monetary Policy Committee might have been split again.
Few analysts expect British interest rates to rise before the middle of next year and a further boost to QE remains a possibility when the current 175 billion pounds runs out in two months. The BoE said the scale of the programme would be kept under review.
"A key factor as to whether or not QE is further extended will be whether or not there are growing signs that bank lending is picking up as this is vital to growth," said Howard Archer, chief UK economist at Global Insight.
"What is much clearer is that interest rates will remain at 0.5 percent for some considerable time to come. Indeed, we do not expect any rises in interest rates until at least the latter months of 2010."
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Some analysts had speculated the BoE could cut the interest rates it pay banks holding reserves with it, to encourage them to lend to the private sector rather than park their money at the central bank.
"They haven't ruled it out but they haven't talked about it either," said Jonathan Loynes of Capital Economist. "If they need to do more, the first step would be to extend QE." The economic newsflow has been a bit brighter since the BoE's last meeting -- house prices jumped another 0.8 percent last month, according to the Halifax index on Thursday -- and the FTSE-100 index of leading shares has risen above 5,000 for the first time in 11 months.
But for now policymakers remain concerned about the strength and sustainability of any recovery, particularly when Britain's ballooning public deficit means tax rises and government spending cuts in the next few years look inevitable.
Output in the second quarter of this year was 5.5 percent lower than a year ago and most commentators are predicting only slow growth through 2010 with unemployment rising for some time to come.
"With the economy still weak and inflation projected to remain well below target for a prolonged period of time, interest rates are not heading up any time soon," said Hetal Mehta, senior economic adviser to the Ernst & Young ITEM Club. (Additional reporting by Sumeet Desai, Fiona Shaikh and David Milliken; Editing by Ruth Pitchford)