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Bank of England sits tight on policy as recovery builds

A plaque depicting Britannia is seen on the outside of the Bank of England in the City of London February 4, 2010. REUTERS/Toby Melville

LONDON (Reuters) - The Bank of England left policy unchanged on Thursday, sticking to its commitment to keep interest rates at rock-bottom until the country's recovery is more firmly established.

The central bank has kept rates at a record-low 0.5 percent since March 2009 to shore up an economy battered by the financial crisis and a heavy overhang of debt.

Britain has enjoyed a surprisingly strong recovery since the start of the year, overtaking its euro zone peers to become one of the fastest growing G7 economies.

But Mark Carney, the Canadian who took the helm of the bank in July, has made clear that he does not want to jeopardize growth by tightening policy too early.

In August, the Bank of England said it would not think about raising rates until Britain's unemployment rate falls to 7 percent, something it predicted would not happen until well into 2016.

Given the speed of Britain's recent recovery, many investors are betting unemployment will fall much more quickly and they expect the BoE to tweak its projections when it publishes new forecasts next week.

As the economy has picked up speed, calls for more stimulus from a minority of the BoE's policymakers have faded away.

The Bank's Monetary Policy Committee opted on Thursday to leave its bond-buying program unchanged at 375 billion pounds ($603 billion), as expected by all the economists who took part in a Reuters poll.

Inflation in Britain is running above the central bank's 2 percent target - in contrast to the euro zone where price growth has slowed to just 0.7 percent. Some of the more hawkish BoE policymakers may be concerned about a recent jump in inflation expectations in Britain.

($1 = 0.6219 British pounds)

(Reporting by Christina Fincher; Editing by Hugh Lawson)