By Joice Alves

London, Dec 16 (Reuters) - Sterling and the euro jumped on Thursday after the Bank of England became the first major central bank to raise interest rates since the beginning of the pandemic, while the European Central Bank said it would continue to cut its bond purchases.

Sterling rose 0.7% to a two-week high of $1.3368 after the BoE raised its main interest rate to 0.25% from an historic low of 0.1%.

The euro rose 0.35% to $1.13350 after the ECB said it will cut bond buys under its 1.85 trillion euro Pandemic Emergency Purchase Programme and will end the scheme as expected in March. It will, however ramp up bond buying under the longer-running but more rigid Asset Purchase Programme(APP).

"The ECB has surprised the market with the relatively contained size of APP monthly purchases going forward, though there are dovish elements in its statement with respect to the reinvestments of the PEPP and the fact that it could be resumed," said Jane Foley, head of FX strategy, at Rabobank in London. "EUR/USD has pushed higher which in part reflects the fact that the market was very long USD headed into this week," she added. Money markets ramped up ECB rate hike bets after the central bank's statement, and are now pricing in a 15 bps increase by Dec. 2022, up from 8bps earlier in the day.

On a busy day for central banks, the Swiss National Bank kept its ultra-low interest rates unchanged while the Norges Bank raised its benchmark rate, a day after the U.S. Federal Reserve unveiled its own tightening plans.

The SNB kept its key rate at -0.75%, while the Norges Bank raised its benchmark interest rate to 0.50% and said more hikes will likely follow next year.

The Swiss franc fell 0.15 versus the euro to 1.0454, not far from its highest level since July 2015, while the Norwegian crown rose 0.4% versus the dollar to 8.94 crowns.

"Despite Omicron, Norges Bank has carried on as planned with a 25 basis point rate hike", ING strategists said. "That shouldn’t come as a huge surprise, partly because policymakers had signalled the move fairly explicitly over recent weeks".

Against a basket of currencies the dollar slipped 0.4% to a one-week low of 95.989, after hitting a three-week high the previous day, as the Fed said it will end its pandemic-era bond buying in March and pave the way for an expected three interest rate hikes in 2022..

The Swedish crown rose 0.6% versus the U.S. dollar to 9.03 as data showed unemployment in the country fell to 7.5% in November.

(Reporting by Joice Alves; Editing by Hugh Lawson)