(Updated at 9:50 EDT)

By Karen Brettell

March 12 (Reuters) - U.S. Treasury yields rose on

Tuesday after consumer price inflation for February came in

slightly above economists' expectations, raising concerns that

the Federal Reserve may not be able to cut rates as soon as

investors expect if price pressures remain elevated.

The consumer price index (CPI) rose 0.4% last month amid

higher costs for gasoline and shelter, and so-called core prices

also gained 0.4%. On an annual basis headline prices rose 3.2%

while core prices gained 3.8%.

"Sticky inflation seems to be very much intact at this

point," said Phillip Colmar, global strategist at MRB Partners

in New York. "This is problematic for the bond market and the

Fed's view that inflation's ultimately coming down to that 2%

target."

Fed funds futures traders cut bets that the Fed will cut by

June to 69%, from 72% on Monday, according to the CME Group's

FedWatch.

Benchmark 10-year notes yields were last up 5

basis points on the day at 4.149%. Two-year yields

gained 5 basis points to 4.582%.

The inversion in the yield curve between two-year and

10-year notes narrowed by one basis point to

minus 44 basis points.

Traders are closely watching data for signs on when the U.S.

central bank will cut rates as economic growth remains strong.

Reports showing higher-than-expected inflation and employment in

January had raised concerns that inflation could be reheating,

though the data was also likely impacted by seasonal factors.

The Fed is expected to hold rates steady when it meets on

March 19-20 though traders will focus on Fed policymakers'

updated economic and interest rate projections.