Sterling steady, rate outlook supports as growth slows

* Sterling steady at $1.9780 GBP=

* Pound rangebound as rates on hold despite slowing growth

LONDON, July 11 (Reuters) - Sterling held steady against the euro and dollar on Friday as poor sentiment on Britain's economy was offset by a view that rates are set to stay on hold for the foreseeable future.

The Bank of England, struggling to balance an unhealthy mix of rising inflation and slowing growth, kept rates steady at 5 percent on Thursday.

Further news on the extent of the British housing market decline this week has added to gloom on the prospects for the economy, but inflation running well above the Bank of England's target means the pound is set to retain its yield advantage.

"The pound is holding up fairly well, there's a 5 percent base rate and there's a short term yield advantage over the euro zone and U.S.," said Daragh Maher, adding that one reason the pound has maintained its footing is problems elsewhere.

"It's a battle of the uglies, it's a case of who looks least ugly, the U.S. has Fannie and Freddie, and euro zone data has been disappointing."

The Bush administration is considering a plan to take over mortgage companies Fannie Mae and Freddie Mac, according to a New York Times report which if correct would indicate the extent of the subprime mortgage crisis in the U.S.