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TREASURIES-Bonds steady as Fed meeting on Wednesday in focus

Karen Brettell

* Fed expected to raise interest rates on Wednesday

* Rate outlook for 2019 in focus

NEW YORK, Dec 17 (Reuters) - U.S. Treasuries were steady on Monday as investors looked ahead to the conclusion of the Federal Reserves two-day meeting on Wednesday, when the U.S. central bank is widely expected to raise interest rates. Investors will be focusing on the Feds outlook and how many rate increases are likely next year. Weak stock markets and slowing international growth have raised speculation that the Fed will need to pause its tightening cycle or risk harming the U.S. economy. The ball is rolling towards dovish expectations even after they do the hike, said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee. Continuing strong data in the United States may, however, make the U.S. central bank less likely to adopt the more dovish tone that many investors are expecting. The odds that people are going to be disappointed are really fairly high, because it really was just three months ago that the Fed said, 'you know, we probably need to get a little bit more hawkish than we have been,' Vogel said. The Fed in September, when it last raised interest rates, forecast that the U.S. economy would enjoy at least three more years of growth. Fed Chairman Jerome Powell also said in October that the key interest rate was probably still a "long way" from a so-called neutral level and that the Fed might even tighten policy beyond that, before saying last month that the policy rate is now "just below" neutral.

Benchmark 10-year notes were unchanged in price

on Monday, yielding 2.889 percent. The yields have fallen from a seven-year high of 3.261 percent on Oct. 9. The closely watched yield curve between two-year and 10-year

notes was last at 16 basis points, after

shrinking to less than 10 basis points earlier this month for the first time since the financial crisis. An inversion of the two-year, 10-year yield curve would be viewed as a signal that a recession is likely to occur around 18 to 24 months later. U.S. President Donald Trump on Monday continued to criticize the Fed for continuing to raise rates, which he says may harm U.S. economic growth. "It is incredible that with a very strong dollar and virtually no inflation, the outside world blowing up around us, Paris is burning and China way down, the Fed is even considering yet another interest rate hike. Take the Victory!" Trump wrote in a tweet.

(Reporting by Karen Brettell; Editing by Steve Orlofsky)