NEW YORK (CNN/Money) - Bond prices fell Tuesday as minutes from the most recent Federal Reserve policy meeting further cemented expectations that the central bank's policymakers will keep raising short-term interest rates to fight inflation.

The dollar climbed against the euro and touched a 17-month high against the yen.

The benchmark 10-year Treasury note lost 7/32 of a point to 98-29/32 to yield 4.39 percent, up from 4.37 percent from late Friday.

The 30-year bond slipped 14/32 to 111-20/32 to yield 4.59 percent, up from 4.56 percent from the previous session. Bond prices and yields move in opposite directions. Bond markets were closed Monday for the Columbus Day holiday.

In shorter-dated debt, the five-year note gained 6/32 of a point to yield 4.26 percent, while the two-year note fell by one tick to yield 4.21 percent.

Treasury prices dipped in the early going Tuesday and longer-term notes fell further after the Fed issued the minutes from its Sept. 20 meeting.

The minutes showed that the Fed believed more rate hikes would be needed to keep inflation in check as energy prices soared in the aftermath of Hurricane Katrina. Inflation hurts bonds because it erodes the value of the fixed-interest paying investment.

"Even after today's action, the federal funds rate would likely be below the level that would be necessary to contain inflationary pressures, and further rate increases probably would be required," the minutes said.

At the September meeting, the Fed raised short-term rates for the 11th straight time to 3.75 percent.

Fears over economic uncertainty and inflation have erupted in the wake of hurricanes Katrina and Rita, but the latest from the Fed suggests most of its policymakers believe the economy will recover quickly from the storms.

The minutes also revealed that the Fed thought any pause to its rate hike campaign could be misleading.

"A pause in policy tightening at this meeting had the potential to mislead the public both about the committee's perceptions of the fundamental strength and resilience of the economy and about its commitment to fostering price stability," the minutes said.

Federal Reserve Governor Mark Olson was the only official to vote against the interest rate hike at the meeting. According to the minutes, he wanted to wait for further data on Katrina's effect on the economy.

Looking ahead, investors are awaiting reports later this week on retail sales, inflation and consumer sentiment.

In currency trading, the dollar rallied, climbing to its highest against the yen in 17 months, before paring some gains. Rising rates generally make dollar-denominated investments more attractive to foreign investors.

The euro bought $1.1994, down from $1.2068 late Monday, while the dollar bought ¥114.50, up from ¥114.12 in the previous session.

-- from staff and wire reports

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