* Bank of England policymakers edge away from rate hike
* Britain's bond yields fall, close gap with Germany's
* Euro zone eyeing end of easy monetary policy
* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Updates after BoE meeting)
LONDON, Aug 3 (Reuters) - The premium investors demand to hold British bonds over German equivalents fell near one-year lows on Thursday after the Bank of England trimmed its growth forecasts and edged away from raising interest rates.
Faced with uncertainty about the impact of Brexit on the world's fifth-biggest economy, the BoE trimmed its growth expectations for this year and next as rate-setters voted 6-2 to keep the Bank rate at a record low of 0.25 percent.
This was down from a split of 5-3 at the last meeting in June, the closest it has come to raising rates in a decade. But Governor Mark Carney and his top officials reiterated that they might raise borrowing costs by a bit more than investors expect over the next three years, possibly within a year.
British bond yields fell sharply after the decision but euro zone markets were little changed as investors remain wary of the possibility that the European Central Bank may make changes to its aggressive stimulus.
The yield on Germany's 10-year bond remains almost double levels seen before ECB President Mario Draghi floated that idea in a speech on June 27.
"The tightening is a knee jerk reaction. The low level of long-term yields in Britain is the market saying they don't believe there is a substantial risk of the BoE successfully tightening monetary policy," Mizuho strategist Peter Chatwell said.
After rising slightly earlier on Thursday, Germany's 10-year yield was trading flat at 0.49 percent. It remains within touching distance of an 18-month high of 0.55 percent hit in mid-July, and double levels seen early on June 27.
British equivalents, meanwhile, fell as much as 4 bps to 1.19 percent.
The gap between the two benchmarks tightened to 70 basis points on Thursday, heading back towards 65 basis points reached in mid-July which was the narrowest in nearly 11 months.
For its part, the U.S. Federal Reserve may in the coming months announce steps to trim its massive balance sheet.
San Francisco Fed President John Williams said on Wednesday that the U.S. economy will likely be strong enough for such a move in September.
At the auctions, France sold over 6 billion euros of bonds while Spain sold over 4 billion euros of bonds.
Analysts said these debt sales had contributed to the earlier rise in euro zone yields as investors sold outstanding bonds to make room in their portfolios for the new supply.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.bi z / c m s / ? p a g e I d = l i v e m a r k e t s
(Reporting by John Geddie; Editing by Matthew Mpoke Bigg and Pritha Sarkar)