LONDON, March 12 (Reuters) - Euro zone bond yields edged up on Tuesday after sticky U.S. inflation data suggested that the Federal Reserve might need to keep interest rates at elevated levels.

The U.S. consumer price index rose 3.2% in the 12 months through February after advancing 3.1% in January. Economists polled by Reuters had forecast CPI gaining 3.1% year-on-year.

Core inflation, which strips out volatile energy and food components, rose 3.8% on an annual basis in February, down from 3.9% in January.

Analysts and economists generally thought the data would keep the Fed on track to begin easing policy in June, but warned that further inflation surprises could see that timeline pushed back.

"On balance, we expect the Fed to begin cutting interest rates in June, by which time there will be more evidence of core PCE (personal consumption expenditure) inflation moving close to the 2% target," said Capital Economics chief North America economist Paul Ashworth.

"But that will now require a shift in tone in the March CPI data."

Euro zone yields have fallen in the last week as both European Central Bank (ECB) President Christine Lagarde and Fed Chair Jerome Powell signalled that they could start cutting rates in June. Mixed U.S. labour market data on Friday supported that view.

Powell, in particular, said the Fed was "not far" from the confidence needed to cut interest rates.

"The upside inflation surprise is a reminder that the last mile to the 2% Fed target could be bumpy," said Daniele Antonucci, chief investment officer at Quintet Private Bank.

"In all, this looks to us the right setup for the central bank to start cutting rates at around mid-year, while we don't see a particular reason to rush this through and cut earlier."

Germany's 10-year yield, the benchmark for the euro zone, was last up 1.5 basis points (bps) at 2.315%. It fell 14.5 bps last week, its biggest weekly drop in 12 weeks, to hit 2.233% on Friday, its lowest since Feb. 2.

Bond yields move inversely to prices.

Germany's two-year yield, which is sensitive to changes in policy rates, rose 3.5 bps to 2.802%.

Italy's 10-year government bond yield was 1 bp lower at 3.613%. The spread over Germany's 10-year yield - a gauge of the risk premium investors ask to hold bonds of the euro area's most indebted countries - stood at 129 bps. It hit 128.4 bps the day before, its narrowest since January 2022. (Reporting by Joice Alves and Samuel Indyk; Editing by Nick Macfie)