Stg, stocks fall, gilts pare losses on BoE report

LONDON, May 14 (Reuters) - Sterling hit a three month low versus the dollar, while UK stocks fell and gilts pared losses on Wednesday after the Bank of England's quarterly report showed inflation staying above target and growth slowing sharply.

Analysts say rising price pressures will limit the scope for growth-boosting interest rate cuts in coming months, potentially causing further problems for the economy.

"Overall the report makes very bearish reading really as far as sterling is concerned with the higher inflation and the weak growth picture as well," said Ian Stannard, senior FX strategist at BNP Paribas.

Sterling fell as low as $1.9366 <GBP=>, down around half a cent from levels seen before the inflation report.

At 0935 GMT, Britain's FTSE 100 .FTSE extended earlier losses, down 10.3 points, or 0.2 percent at 6,201.6.

The June long gilt future FLGc1 pared losses, with the contract at 107/63, compared with 107.54 earlier. The June short sterling contract also pared losses, to stand at 94.220, down 2 ticks on the day. Before the BoE, it was at 94.215 FSSM8.

Earlier in the session, short sterling hit 94.200 - its lowest level since Oct. 21.

For more on the inflation report see [ID:nBOE001414].

(Reporting by London Markets Team)