(Updated at 0900 EDT)

By Karen Brettell

May 15 (Reuters) - U.S. Treasury yields fell to more

than five-week lows on Wednesday after data showed U.S. consumer

price inflation was largely as expected in April with headline

prices rising slightly less than expected, boosting expectations

that the Federal Reserve will cut interest rates two times this

year.

Higher than expected consumer price inflation in the first

quarter raised concerns that the U.S. central bank will not be

able to cut interest rates as many times as previously expected

this year.

Fed funds futures traders are now pricing in 51 basis

points of cuts this year, up from 45 basis points on Tuesday,

with the first 25 basis point cut likely in September.

"We haven't made significant progress this year in our

battle against inflation... and this is a step in the right

direction to get the Fed more comfortable," said Art Hogan,

chief market strategist at B. Riley Wealth in New York.

The consumer price index rose 0.3% last month after

advancing 0.4% in March and February. In the 12 months through

April, the CPI increased 3.4% after climbing 3.5% in March.

Economists polled by Reuters had forecast the CPI gaining 0.4%

on the month and advancing 3.4% year-on-year.

The closely watched core CPI rose 0.3% in April, as

expected, after advancing 0.4% in March. In the 12 months

through April, the core CPI increased 3.6%. That was the

smallest year-on-year gain since April 2021 and followed a 3.8%

increase in March.

The Fed is likely to still need further confirmation that

inflation is heading back closer to its 2% annual target before

cutting rates.

"What it doesn't do is put the Fed on a trajectory to begin

cutting immediately. They're going to need a couple more reports

to get some confidence," said Jason Pride, chief of investment

strategy and research at Glenmede in Philadelphia.

Other data on Wednesday also showed that U.S. retail

sales were

unexpectedly flat

in April as higher gasoline prices pulled spending away

from other goods.

Benchmark 10-year yields were last down 8 basis

points on the day at 4.367% and got as low as 4.340%, the lowest

since April 5.

Two-year yields fell 8 basis points to 4.739% and

reached 4.711%, also the lowest since April 5.

The inversion in the yield curve between two-year and

10-year notes was little changed on the day at

minus 37 basis points.