* Eurozone periphery government bond yields tmsnrt.rs/2ii2Bqr

MILAN, June 17 (Reuters) – Eurozone government bond yields surged and spreads widened on Thursday as the Fed policy meeting was more hawkish than expected, bringing forward the first expected rate hike Americans.

Thirteen of the 18 policymakers forecast a “take-off” in borrowing costs in 2023 instead of 2024, with 11 seeing two increases of 25 basis points. Seven officials see rates rise next year, opening up the possibility of even more aggressive action.

Fed Chairman Jerome Powell said there had also been initial discussions about when to pull out Fed bond purchases. This conversation would be concluded in the coming months as the economy continues to recover.

“For the remainder of the day, no fundamental impetus is expected that could give the market a new direction,” Commerzbank analysts told clients.

“When the US market reopens, it should become clear whether the market is still trading on a short basis, with market participants using the saving of returns for square positions,” they added. “More likely, however, the Fed and inflation backdrop should encourage more shorts.”

The yield on German 10-year government bonds, the block’s benchmark, fell 2.5 basis points to -0.17% at 07:28 GMT, after briefly hitting its highest level since May 25 at – 0.149%.

The Fed’s projections showed that US inflation is now on track to exceed the Fed’s 2% target by a large margin of 3.5% this year and remains slightly elevated for the next two years.

According to analysts at Deutsche Bank, “If 0 meant you thought current US inflation was totally transient and 100 meant we were likely to see very high inflation, then before last night’s FOMC the Fed seemed to be around 5 ”.

After the meeting, it’s “somewhere between 10 and 20,” they said, adding that the Fed’s position “makes more sense now.”

Periphery bond prices – which move in the opposite direction of yields – are underperforming core bonds because they have benefited the most from ultra-accommodative monetary policy to avoid the negative economic impact of the pandemic.

Italian 10-year government bond yields fell 3.5 basis points to 0.81, with a closely watched spread with the German yield rising 3.5 basis points to 98.3. (Report by Stefano Rebaudo Editing by Raissa Kasolowsky)

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