Sterling rises as BoE cuts rates by 0.5 pct

* Pound hits 3-wk highs vs dollar, euro after BoE rate cut

* BoE cuts rates by 50 bps to 1.5 pct, all-time low

* Pound up 1.4 pct to $1.5337 GBP=, euro/stg down 1 pct * BoE cites "substantial" pound fall to help economy

By Tamawa Desai

LONDON, Jan 8 (Reuters) - Sterling rose to three-week highs against the dollar and euro on Thursday after the Bank of England cut key interest rates as widely anticipated, but at the low end of expectations.

The BoE cut the key bank rate by 50 basis points to a record low of 1.5 percent as it battles to keep the economy from falling into a deep slump, and experts say borrowing costs will fall again next month. [ID:nL8434439]

Many in the market had expected the UK central bank to cut rates by a bigger margin after it slashed interest rates by a full percentage point in December.

"It appears that the BoE has taken a cautious approach in cutting by 50 basis points. I think it will be slightly disappointing to the market," said Matthew Sharratt, economist at Bank of America.