(Updates after Lagarde press conference)

By Linda Pasquini and Samuel Indyk

June 5 (Reuters) - Euro zone bond yields turned higher

on Thursday after European Central Bank chief Christine Lagarde

hinted that the easing cycle could be coming to an end, after

its eighth rate cut since June last year.

The ECB

lowered its deposit rate

by 25 basis points to 2%, in line with expectations, having

now reduced the rate by a combined two percentage points over

the last 12 months.

With

inflation back at target

, investors were watching for clues on the future path for

interest rates.

The outlook for further rate cuts took a hit after

Lagarde said the ECB was in a "

good place

", suggesting the central bank could wait before lowering

borrowing costs further, even though she denied this was

confirmation of a pause.

"Today's communication is rather suggesting that they

might prefer to take a pause in July and wait for more data,

wait for more clarity on trade negotiations, and also wait for

the next round of staff projections in September," said Jussi

Hiljanen, chief rates strategist at SEB.

Money market traders scaled back bets for rate cuts and

were now pricing in just 25 basis points of easing by year-end,

from around 30 basis points before the press conference began.

Futures imply just a 12% chance of a rate cut in July,

from about 30% before the press conference.

Germany's two-year yield, which is sensitive

to changes in monetary policy expectations, was up 6.5 basis

points at 1.86%, having been slightly lower before Lagarde's

press conference.

Germany's 10-year yield, the benchmark for

the 20-nation euro zone, was last up 3 basis points at 2.555%,

having earlier hit 2.476%, its lowest since May 8.

The central bank also

lowered its inflation and growth projections

as U.S. President Donald Trump's trade war continues to

impact the global economy.

"A further escalation of trade tensions over the coming

months would result in growth and inflation being below the

baseline projections," the ECB said in its statement.

The European Union and the U.S.

remain in talks

about a potential trade agreement.

Italy's 10-year yield, the benchmark for the

euro area periphery, was up 3.5 bps at 3.533%, having earlier

hit its lowest since February 10 at 3.443%. The gap between

Italian and German yields stood at about 95 basis

points.

Meanwhile, data on Thursday showed a larger-than-expected

decline in euro zone producer prices in April compared with the

previous month, helped by lower energy prices.