Sterling slips ahead of BoE minutes

LONDON, May 21 (Reuters) - Sterling fell versus the dollar and euro on Wednesday with investors downbeat on the currency ahead of minutes from the Bank of England that will be watched for their implications for British monetary policy.

Economists polled by Reuters predicted the BoE's Monetary Policy Committee voted by a margin of 8-1 to keep rates on hold at 5 percent in May. The minutes will be released at 0830 GMT. (For a preview, please click on [ID:nL1998785].)

Expectations of BoE rate cuts this year have been pared back due to increasing inflationary pressure.

At the May meeting, MPC members had access to the quarterly inflation forecasts published by the central bank last week which showed inflation rising close to 4 percent this year despite a slowing economy.

"(The minutes) are likely to confirm what was seen in the inflation report. Inflation is above 3 percent and this is lowering the scope for the Bank of England to cut rates," said Hans-Guenter Redeker, chief FX strategist at BNP Paribas.

By 0737 GMT the pound was down 0.2 percent at $1.9650 <GBP=>. The euro was up 0.2 percent at 79.68 pence <EURGBP=>.

Analysts continue to paint a gloomy picture for the British economy and, therefore, the pound.

"There is weakness in the economy. The UK economy has too much debt and the long term outlook is bleak," Redeker said.

Public sector finance figures are also due at 0830 GMT.

(Reporting by Simon Falush) (Editing by Gerrard Raven)