By Akane Otani

U.S. government prices edged lower Wednesday ahead of the conclusion of the Federal Reserve's latest policy meeting.

The yield on the benchmark 10-year U.S. Treasury note recently traded at 2.903%, compared with 2.881% Tuesday.

Yields, which rise as bond prices fall, have climbed three of the past four trading days, as investors have trimmed bets leading into the release of the Fed's March policy statement.

Analysts widely expect the central bank to raise short-term interest rates by a quarter percentage point -- a move that would mark the Fed's first interest-rate increase of the year, and its sixth since late 2015. What is less certain is the extent to which the central bank will adjust its so-called dot plot, which conveys the interest-rate expectations of Federal Open Market Committee members.

Back in December, the Fed's dot plot showed officials expecting three rate increases in 2018 and two more in 2019. Since then, investors have begun to bet that the median projection for 2018 could shift to four rate increases, in part due to a $1.5 trillion tax cut package and a $300 billion, two-year federal funding increase that they say could boost economic growth and spur a pickup in inflation.

Recent data have suggested inflation, which threatens government bonds by chipping away at the purchasing power of their fixed payments, could be less robust than bond investors feared at the start of the year. A gauge of consumer prices rose less than expected in February, while wage growth slowed from the previous month.

Still, bond investors remain wary ahead of the release of the Fed's policy statement, saying any sign that officials are eyeing more rate increases than previously signaled could trigger a fresh wave of bond selling.

"Powell and the committee really need to walk a fine line," said Sean Simko, head of fixed-income portfolio management at SEI Investments. "We all know one rate hike is expected and it should be received without disruption, but we could definitely see tremors in the market if they try to weave in another hike."

Write to Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

March 21, 2018 10:09 ET (14:09 GMT)

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