Feb 12 (Reuters) - German government bond yields rose by

over 10 bps in the last two days as Federal Reserve Chair Jerome

Powell said the central bank is not in a rush to cut interest

rates, and U.S. data supported expectations for a pause in the

monetary easing cycle.

U.S. consumer prices increased by the most in nearly 1-1/2

years in January.

Powell said the Fed was in no hurry to make any further

interest rate cuts but stood ready to do so if inflation

declines further or the job market weakens.

Traders priced in 26 basis points (bps) of Fed rate cuts by

year-end. They discounted 40 bps on Tuesday before

Powell's speech.

Germany's 10-year bond yield, the euro area's

benchmark, was last up 5.5 basis points (bps) at 2.48%, the

highest since January 31, after rising by 7 bps the day before.

U.S. Treasury yields jumped 12 bps to 4.65%.

German borrowing costs edged up to a one-week high before

the U.S. figures as markets digested tariff developments,

comments from the Fed chair and a rise in energy prices.

"Today's inflation data support our view that inflation will

remain above target throughout this year, preventing the Fed

from cutting interest rates," said Atakan Bakiskan, U.S.

Economist at Berenberg.

"Although disinflation in shelter and non-market-based

services can help build this confidence (that the inflation

trend is moving downward), the Fed cannot ignore Trump."

Analysts expect tariffs to boost inflation in the U.S.,

while in the euro area, they could trigger a deflationary shock,

as the negative impact on growth may outweigh the inflationary

effects of retaliatory measures.

However, European gas prices (TTF) have reached the highest

in almost two years this week, and re-ignited inflation concerns

among market participants.

"With the recent rise in commodity prices and the levying of

trade tariffs, the risk of further upside surprises will be

front-of-mind for investors and the Federal Reserve," said Colin

Finlayson, fixed income investment manager at Aegon AM.

Work on the administration's reciprocal tariffs is ongoing,

and talks with other nations are underway, U.S. President Donald

Trump's economic adviser, Kevin Hassett, said on Wednesday.

Money markets priced in a European Central Bank deposit

facility rate at 1.97% in December from

1.85% on Monday before Powell's speech. The deposit rate is

currently at 2.75%.

Germany's 2-year yield rose 5 bps to 2.13%.

Italy's 10-year yield was up 3.5 bps at 3.56%.

The yield gap between Italian and German yields

was at 108 bps.

(Reporting by Stefano Rebaudo, editing by)