TREASURIES-Prices pare gains on consumer price increase
* Prices pare earlier gains after CPI beats expectations
* Bernanke testimony on Wednesday in focus
* Fed to buy $1.25 bln - $1.75 bln in bonds due 2036-2043
NEW YORK, July 16 (Reuters) - U.S. Treasuries prices pared gains on Tuesday after data showed U.S. consumer prices rose more than expected in June as gasoline prices jumped, reducing fears inflation may continue to fall. The Labor Department said on Tuesday its Consumer Price Index increased 0.5 percent, the largest increase since February, after nudging up 0.1 percent in May, though gasoline prices accounted for about two thirds of the increase in the CPI. Stripping out volatile energy and food, consumer prices increased 0.2 percent for a second straight month. That took the increase over the 12 months to June to 1.6 percent, the smallest increase since June 2011. "It's comforting to see some stabilization in core services prices," said Laura Rosner, economist at BNP Paribas in New York. However, "we expect personal consumption to remain weak." Falling inflation has led some investors to speculate that the Federal Reserve may struggle to pare back its bond purchase program if it continues. Treasuries prices had earlier gained after a surprise dip in German confidence renewed concerns about Europe's largest economy. The yield gap between 10-year Treasuries and comparable German government bonds has expanded to almost a full percentage point, the widest in around seven years, as the U.S. economy regains momentum while Europe comes under renewed pressure. Benchmark 10-year Treasuries were last up 2/32 in price to yield 2.54 percent, after earlier falling to 2.51 percent. Investors are now focused on Bernanke's semi-annual testimony before Congress on Wednesday and Thursday, where he is expected to reiterate that the central bank may pare its bond purchases but will keep rates low for a long time to come. "I think the central banks would like to get out of the bond buying business and the way they are going to get out of it is easy in the front end for a long period of time, which will anchor rates lower overall," said Tom Tucci, head of Treasuries trading at CIBC in New York. Treasuries yields have jumped since Fed Chairman Ben Bernanke said in June that the U.S. central bank may reduce its bond purchases this year if the economy continues its momentum. Bernanke's testimony will be released at 8:30 a.m. EDT (1230 GMT) on Wednesday. The Fed will buy between $1.25 billion and $1.75 billion in bonds due 2036 and 2043 on Tuesday as part of its ongoing purchase program.