MUMBAI, Dec 19 (Reuters) - Indian government bond yields

rose sharply on Thursday, with the benchmark bond yield hovering

around a key par level, after the U.S. Federal Reserve flagged a

slower pace of policy easing in 2025, citing sticky inflation

and a stable labour market.

The 10-year bond yield was at 6.7828% as of

9:45 a.m. IST, compared with the previous close of 6.7465%. The

yield had risen to 6.7867%, its highest since Nov. 29, earlier

in the day.

"As expected, there was a gap down in bond prices, and with

the benchmark bond at touching distance of par level, the

selloff may slow down," a trader with a state-run bank said,

referring to 6.79% coupon at which the bond was issued.

The trader did not, however, rule out a mild reversal in

uptrend of yields as the trading session progresses.

The 10-year U.S. Treasury yield crossed 4.50% mark, hitting its

highest level since end of May after the policy decision and

commentary from the Fed, which cut rates by 25 basis points as

widely expected.

The new projections show that officials expect the core

personal consumption expenditures price index to be stuck at

2.5% through 2025, significantly higher than the Fed's 2%

target.

The policymakers now expect only 50 basis points of rate cuts in

2025 and in 2026, according to the updated dot plot, down from

100 bps forecast in September. The odds of a pause in January

have jumped to 94%, according to the CME FedWatch Tool.

Chair Jerome Powell said more reductions in borrowing costs

hinge on further progress in lowering stubbornly high inflation.

"As the world steps into 2025 with U.S. tariff policies and

its reciprocity ahead, we are of the view that it would hurt

growth more than anything else. Thereby further uncertainty in

policy guidance is not ruled out," said Siddharth Kothari, an

economist with Sunidhi Securities.

Locally, investors are waiting for debt supply and minutes

of the Reserve Bank of India's December meeting, both due on

Friday.

(Reporting by Dharamraj Dhutia; Editing by Varun H K)