LONDON- Sterling held to gains versus the dollar on Wednesday after the Bank of England Governor Andrew Bailey and other central bank officials spoke to parliament about the February rate hike and tried to cool down aggressive rate increase bets.

Speaking about the decision earlier this month to raise interest rates, Bailey said he saw clear risk of inflation sticking at high level, adding that second round effects are a concern and that could require more hikes. 

But he urged investors not to get carried away with bets on future interest rate hikes.

"If we get the second-round effects..., of course we would need to react to that with higher interest rates," he said. However, Bailey said, that would hurt the economy and increase unemployment.

Sterling barely moved after BoE members speeches. Versus the dollar, it was up 0.1% to $1.3601 at 1135 GMT, after touching a six-day low in the previous day. 

It was flat against the euro at 83.35 pence, after staging its worst day against the single currency in one week on Tuesday, falling to 83.82.

"Sterling has traded sideways through today's BoE testimony to the Treasury Committee," said Simon Harvey, head of FX analysis at Monex Europe.

"BoE communications since February's meeting have largely taken aim at cooling market-implied policy rates," he said.

The BoE raised interest rates to 0.5% this month from 0.25%, in a split decision with some members voting for a 0.50% increase to 0.75%.

Jonathan Haskel, a member of the monetary policy committee, part of a minority who voted for a bigger increase, told parliament his decision was "finely balanced". 

On Tuesday, Deputy Governor Dave Ramsden, who also voted for a bigger increase, said he now saw a "modest" rate hike over the coming months. 

Investors are fully pricing in another 0.25% rate hike at the BoE's next scheduled meeting on March 17.

Jeremy Stretch, head of G10 FX strategy at CIBC, said the scale of tightening priced by year-end, currently almost 144 basis point is "too aggressive".

Traders also said sterling got some support from improved risk sentiment, which pushed the pan European STOXX 600 index up 0.7%, after falling to a seven-month low on Tuesday, as investors took stock of Western sanctions against Moscow for ordering troops into separatist regions of eastern Ukraine.

(Editing by Angus MacSwan and Mark Heinrich)