FTSE 100 steady as UK raises growth forecasts
* FTSE 100 steady, FTSE 250 up 0.4 pct
* UK govt raises growth forecasts, BoE sticks to easy policy
* U.S. stimulus worries are a cap on sentiment
By Francesco Canepa
LONDON, Dec 5 (Reuters) - Britain's mid-cap shares advanced and blue chips held steady on Thursday as the UK government upgraded its growth forecasts for this year and the next while the Bank of England confirmed its easy monetary policy.
Chancellor George Osborne said the British economy was on track to grow by 1.4 percent this year, more than double his March forecast, and 2.4 percent next year, up from the previous estimate of 1.8 percent.
Meanwhile, the BoE left its monetary policy unchanged and stuck to its commitment to keep interest rates at a record low until Britain's recovery is more firmly established.
"Even with the GDP up-revisions, the UK's loss over the cycle of a quarter of a percentage point a year in potential growth may take years to claw back," Neil Williams, the chief economist at Hermes, said in a note, "This, plus chance of more benign ... inflation in 2014, stress the importance of keeping a loose monetary stance - with the BoE right to defer any Bank rate hike."
Both the government's and the Bank of England's decisions were widely expected, so market reaction was relatively muted.
The blue-chip FTSE 100 index was up 0.82 points at 6,510.79 points, off an early low of 6,487.15 points. The mid-cap FTSE 250, which has a larger exposure to Britain's domestic economy, was up 53.91 points, or 0.4 percent, at 15,181.86 points at 1255 GMT.
Housebuilders Taylor Wimpey, British Land and Persimmon slightly extended gains after Osborne said more companies were joining the Help to Buy Scheme for property purchases and that there would be 1 billion pounds ($1.63 billion) of new loans for housing development.
"I see the Help to Buy as a catalyst for house-building," said Alistair Winter at Daniel Stewart. "It will be (BoE governor) Carney who's the bad guy who switches it off," referring to the risk of higher inflation associated with rising property prices.
Curbing gains on the index were concerns over withdrawal of the U.S. Federal Reserve's asset-purchase programme, which has helped global equities rally since it was announced in September 2012. The Fed has said it will start scaling back the programme when certain economic data meet its targets.
Recent robust data have re-ignited speculation that could happen before year-end. A better-than-expected reading from the ADP National Employment Report on U.S. private-sector jobs on Wednesday raised expectations Friday's jobs report will surprise on the positive side.
The FTSE hit its lowest close since mid-October at 6,509.97 on Wednesday and has sunk nearly 5 percent from October's peak of 6,819.
"We're not through the 'good news is bad news' phase quite yet - and I suppose if we get a strong payroll number tomorrow, then the talk about the tapering (being announced at the December meeting) will be back on the table again," said Ian Williams, a strategist at Peel Hunt.