LONDON (Reuters) – The Bank of England made no change to interest rates or its bond purchase programme yesterday, as it waits for Britain's new government to reveal the extent of its fiscal austerity measures in a June 22 budget.

The Monetary Policy Committee's decision to leave rates at a record low 0.5 percent and hold its asset purchase total at £200 billion ($291.3 billion) was expected by all 61 economists in a Reuters poll, and elicited no market reaction.

Most analysts see no tightening until the fourth quarter at the earliest, as the BoE seeks to offset sharp government spending cuts and fall-out from the euro zone debt crisis.

Inflation, at almost double the central bank's two percent target, has not subsided as quickly as hoped, but policymakers will want to plug the government's new fiscal projections into its quarterly forecasts before altering their stance.

"August's quarterly Inflation Report from the BoE will be extremely important as it will set out how the contrasting influences behind the inflation outlook play out in the MPC's mind," said Philip Shaw, economist at Investec.

"It is possible to see rates beginning to rise toward the end of this year if the recovery gains traction. At the same time though, an aggressive tightening at the emergency Budget may persuade the MPC to hold its fire into 2011."

The European Central Bank also held borrowing costs steady at one percent, as widely expected. Britain's central bank believes price pressures will be short-lived and that the large degree of slack in the economy resulting from its deepest downturn since World War Two, will help inflation return to target before the year is out.

Britain's economic recovery has been relatively muted, with GDP growing by just 0.3 percent in the first three months of this year, slower than the 0.4 percent achieved at the end of last year and weaker than the BoE had initially forecast.

And there are fears that the government's spending cuts will lead to mass lay-offs in the public sector, which employs a fifth of Britain's workforce, and could prompt a renewed weakening in the second half of the year.

Conservative finance minister George Osborne has pledged to cut the country's budget deficit, currently almost 11 percent of economic output, at a "significantly accelerated" pace, starting with £6 billion of cuts this year. His first budget is expected to contain a mix of spending cuts and tax rises that could have a profound impact on both growth and inflation in the months ahead.

A small number of economists reckon that may leave the BoE with little choice but to revive its bond-buying programme to help prop the economy as rates cannot fall any further.

"Our expectation is no change into 2011 and if things take a turn for the worse, which we wouldn't rule out once the new era of fiscal austerity starts to bite, who knows whether the MPC will have to start buying gilts again," said Chris Scicluna, deputy head of economic research at Daiwa Capital Markets.