TREASURIES-Short-dated U.S. yields rise on inflation data

* US yield curve flattens in scramble for longer-dated debt

* Core CPI posts biggest rise in 4-1/2 years in January (Updates trading, adds comments)

By Richard Leong

NEW YORK, Feb 19 (Reuters) - Yields on shorter-dated U.S (Other OTC: UBGXF - news) . Treasury debt rose on Friday as a stronger-than-expected report on consumer prices in January kindled bets the Federal Reserve may raise interest rates swifter than some traders had anticipated.

Losses on Wall Street and a renewed drop in oil prices also revived some safehaven demand for U.S. government debt, pushing 30-year Treasury yield to its lowest in a week, analysts said.

"Now (Other OTC: NWPN - news) the risk is that inflation may be rising faster than previously thought. The market has pulled in rate hike expectations a bit back into 2016," said Gennadiy Goldberg, interest rate strategist at TD Securities in New York.

Two-year Treasury notes, which are the most sensitive to traders' view on Fed policy, fell 2/32 in price to yield 0.738 percent, up nearly 3 basis points from late on Thursday.

The Labor Department said on Friday its Consumer Price Index, excluding the volatile food and energy prices, rose 0.3 percent last month, faster than the 0.2 percent forecast of analysts polled by Reuters.

The CPI core rate saw its biggest gain since August 2011 and followed a 0.2 percent rise in December.

The overall CPI (Other OTC: CPICQ - news) was unchanged in January after slipping 0.1 percent in December. Economists polled by Reuters had forecast a 0.1 percent fall.

Fed policy-makers have raised concerns that underlying inflation has continued to fall short of its annual 2 percent goal due to a strong dollar and weak commodity prices.

Global market (LSE: 125875.L - news) turmoil has compounded the risks to a modest U.S. economic expansion, causing some top Fed officials to reconsider the pace of planned rate increases.

As the January CPI report revived bets on rate hikes later this year, traders scooped up longer-dated Treasuries on the view they would offer higher returns than shorter-dated issues.

These "curve-flattening" bets narrowed the yield premium of 30-year bonds over five-year notes to its smallest in over three weeks.

The 30-year bond was up 22/32 in price for a yield of 2.597 percent, down 3 basis points from late on Thursday, while the five-year note was unchanged to yield 1.218 percent, up fractionally on the day.

Benchmark 10-year Treasuries were up 5/32 in price to yield 1.741 percent, down 2 basis points from Thursday's close. (Editing by Bernadette Baum)