* FTSE 100 up 0.5 percent, extends winning streak to 7 days
* BT surges above 300p for the first time since Nov 2007
* Focus on monetary policy as key to hitting record highs
LONDON, May 10 (Reuters) - Heavyweight telecom BT led Britain's top shares higher on Friday, setting fresh 5-1/2 year highs on the top blue-chip index.
The FTSE 100 was up 33.55 points, or 0.5 percent, at 6,626.29 by 0754 GMT, having hit an intraday high at 6,634.91, its highest level since November 2007 and just 4.5 percent off of 1999's all time high. It is the index's seventh straight session of gains.
BT contributed over 11 points alone to the advance. Shares in the telecoms group leapt 11.2 percent, rising above 300 pence for the first time since November 2007 as it beat annual forecasts and gave a good outlook ahead of its pricing showdown with B Sky B.
"We've seen some buying in BT... There's relief that it's not bad, and the market is taking comfort in the fact that they're being proactive in their business model," said Joe Rundle, head of trading at ETX Capital, although he said that the new strategy may squeeze margins in the longer term.
BofA Merrill Lynch, describing BT's results as "very strong", upgraded its rating on the stock to "buy".
Positive earnings newsflow also gave TUI Travel a boost, with the tour operator adding 2.3 percent as it forecast a full-year profit rise of at least 10 percent.
The UK benchmark has risen around 12 percent this year as interest rate cuts and injections of liquidity by central banks around the world have lifted equity markets in spite of a stuttering global economy.
On Friday, the Group of Seven finance chiefs were expected to look to central banks to find new measures to stimulate the economy and asset prices.
U.S. Federal Reserve Chairman Ben Bernanke was also expected to leave the door open to further easing in a speech on Friday after a week of conflicting signals from the central bank's members.
"The only game in town is ultra-easy and unconventional monetary policy by central banks, and if the G7 meeting confirms that this is going to continue for a while, then the stock market can continue to ignore operating realities for a bit longer," Jeremy Batstone-Carr, analyst at Charles Stanley, said.
"The question has got to be 'when' will the FTSE hit a new all-time high, rather than 'if.'" (Editing by Hugh Lawson)