NEW YORK (CNNMoney.com) - Treasury prices fell slightly Wednesday after a key inflation measure was revised higher and comments by a Fed official fueled fears that the Federal Reserve might continue its monetary tightening campaign.

The dollar posted its third straight day of gains against the euro and yen.

The benchmark 10-year note fell 6/32 to 110-02/32, yielding 4.49 percent, up from 4.46 late Tuesday. The 30-year bond lost 10/32 of a point to 110-08/32 to yield 4.67 percent, up from 4.66 in the previous session. Bond prices and yields move in opposite directions.

In shorter-dated debt, the two-year note fell one tick, yielding 4.43 percent. The five-year note was down 4/32, yielding 4.43 percent.

The Commerce Department said Wednesday gross domestic product growth in the third quarter was 4.1 percent, below the previous estimate of 4.3 percent and just above the 4.2 percent for all of 2004. Second-quarter growth was 3.3 percent.

The government also revised upward the core personal consumption expenditures index, which is the Federal Reserve's preferred inflation measure. The core PCE, which excludes food and energy components, was 1.4 percent, up from the previous estimate of 1.2 percent.

"The market has been a little top heavy, so (the PCE increase) did offer a bit of an excuse to sell," Kevin Flanagan, a fixed income strategist at Morgan Stanley in White Plains, told Reuters.

Following a business luncheon in North Carolina Wednesday, Richmond Fed President Jeffrey Lacker, told reporters that he expected the U.S. economy to grow at a rate of 3.5 percent in 2006, but that inflation risks had not fully disappeared.

"We at the Fed are well-positioned to resist inflation pressures, should they emerge," he said, noting that the Fed "should respond vigorously" if inflation expectations rise.

Last week, the Federal Reserve raised its short-term rate target by a quarter point to 4.25 percent, its 13th consecutive quarter-point rate hike since June 2004.

Investors have been hopeful that the Fed would pause in its monetary tightening campaign, as interest rates are approaching a so-called neutral level, a level that is supposed to keep the economy growing at a healthy pace without spurring a harmful pickup in inflation.

Any sign of growing inflationary pressures usually chases investors out of the bond market because, over time, inflation erodes the value of their fixed-income investments.

However, rising interest rates generally help the dollar as they make dollar-denominated securities more attractive to foreign investors.

In currency trading, the dollar rallied, posting its third straight day of gains against the euro and yen.

The euro bought $1.1836, down from $1.11864 late Tuesday. The dollar bought ¥117.37, up from ¥117.14 in the previous session.

--from staff and wire reports

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