NEW YORK (CNNMoney.com) - Treasury prices tumbled Wednesday following a higher-than-expected reading on inflation in consumer goods, fueling speculation the Federal Reserve will continue its interest rate hike campaign.

The dollar rallied against the euro and the yen.

The 10-year Treasury note fell 15/32 to 99-22/32 to yield 5.16 percent, up from 5.10 Tuesday.

The 30-year bond lost 30/32 to 88-10/32, yielding 5.28 percent, up from 5.21 in the previous session. Bond prices and yields move in opposite directions.

The five-year note fell 5/32 to yield 5.03 percent, while the two-year note fell one tick, yielding 4.97 percent.

Bonds slipped after the Labor Department reported that its Consumer Price Index (CPI), a key measure of inflation in consumer goods, climbed 0.6 percent in April mostly due to higher energy prices. (Full story.)

Economists surveyed by Briefing.com forecast a 0.5 percent, following a 0.4 percent rise in March.

The so-called core CPI, which strips out volatile energy and food prices, rose 0.3 percent, surpassing expectations of a 0.2 percent increase.

"That keeps inflation concerns very much in the forefront here," John Canavan, market analyst at Stone & McCarthy at Princeton, New Jersey told Reuters.

Treasury investors, who fear inflation since it erodes the value of the fixed-income investment, have been looking for clues about inflation pressures in an effort to determine whether the Federal Reserve will raise interest rates at its next meeting in late June.

Tuesday's weaker-than-expected Producer Price Index had helped relieve bond traders' inflation fears, despite the rising cost of such commodities as oil and gold. (Full story)

But Tuesday's CPI report quickly become the focus for bond traders.

Interest rate futures on the chances that the central bank would raise rates at its June meeting climbed to 50 percent following the CPI report, Reuters reported.

In currency trading, the euro bought $1.2735, down from $1.2858 on Tuesday. The dollar traded at ¥111.02, up from ¥109.72 in the previous session.

--from staff and wire reports

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