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By Tatiana Bautzer and Chuck Mikolajczak

NEW YORK, May 13 (Reuters) - U.S. 10-year Treasury

yields were flat to marginally higher on Tuesday after inflation

in the world's largest economy grew slower than expected last

month, suggesting that the Federal Reserve is likely to take its

time resuming its easing cycle.

The inflation data showed limited immediate impact from

the Trump administration's sharp tariff rises announced early

last month. Analysts, however, said prices are likely to pick up

in coming CPI readings as they will show the period during which

tariffs went into effect.

The consumer price index increased 0.2% last month

after dipping 0.1% in March, which was the first decline since

May 2020. Economists polled by Reuters had forecast the CPI

would rise 0.3%. In the 12 months through April, the CPI climbed

2.3% after rising 2.4% in the 12 months through March.

Excluding the volatile food and energy components, the

CPI rose 0.2% last month after gaining 0.1% in March. The

so-called core CPI inflation increased 2.8% on a year-on-year

basis in April after rising 2.8% in March.

Treasury yields slipped slightly after the CPI release. By

late morning trading, the 10-year Treasury yield

was up two basis points (bps) to 4.477%. The two-year

yield, was slightly down at 3.994%.

Analysts noted that even as the headline number was

0.2%, below the 0.3% forecast, specific goods such as furniture

and video and audio products showed high price increases.

"The report basically indicates that the Fed needs to be

very cautious and that the stand that they have taken is

probably the right course, for now," said Brian Jacobsen, chief

economist at Annex Wealth Management.

Analysts expect the Federal Reserve will not cut

interest rates until later in the year and potentially cut

twice. The first 0.25 basis point cut is expected for the

September meeting, according to CME's FedWatch tool.

After the U.S. and China agreed a 90-day reprieve on

tariffs on Monday, showing the world's two largest economies'

wish to avoid a trade war, markets reduced expectations of a

U.S. recession or stagflation scenario.

"The CPI was softer than expected, which is good news, but

markets are still cautious and looking for clarity on the longer

term policy path," said Societe Generale's head of U.S. rates

strategy Subadra Rajappa. She noted stocks got more of a

positive momentum from the inflation report than the bond

market.

Markets are beginning to look at the potential results

of budget discussions in Congress. Republicans in the U.S. House

of Representatives on Tuesday will kick off public debate on

major pillars of President Donald Trump's tax cut and budget

legislation. Congress' bipartisan Joint Tax Committee estimates

the tax cuts would cost $3.72 trillion.