TREASURIES-Bonds firm on in-line CPI before Fed statement

* Fed widely expected to hold short-term rates near zero

* CPI headline matches forecast, core flat in November

* Housing starts, permits jump in November (Updates market action, adds new quote)

By Richard Leong

NEW YORK, Dec 16 (Reuters) - U.S. Treasury debt prices traded modestly higher on Wednesday after fresh data on consumer prices and housing starts soothed concerns over a resurgence in inflation in an improving economy.

The data also encouraged bargain-minded investors to buy longer-dated issues whose yields have been hovering near four-month highs, traders and analysts said.

The impact from the market-friendly data was muted by typical caution ahead of the Federal Reserve's last policy statement of 2009 due later Wednesday.

The government's Consumer Price Index, its broadest inflation gauge, rose 0.4 percent in November, matching forecasts. The index's core rate, which strips out volatile energy and food prices, was unchanged on the month, versus the 0.1 percent rise predicted by economists.

The in-line CPI report came a day after the government said the Producer Price Index jumped 1.8 percent last month.

For a graphic on the U.S. CPI, see here

"There were some concerns in the market that the CPI could surprise on the upside after yesterday's PPI reading. But the figures turned out to be in line," said Michael Pond, Treasury strategist at Barclays Capital in New York.

The government also said housing starts rose 8.9 percent in November, signaling further stabilization in the sector. However, the increase was not big enough to alter the view of a gradual recovery in housing. For more, see [ID:nN164079]

In light early trading, benchmark 10-year notes US10YT=RR were up 9/32 in price at 98-15/32. Their yield, which moves inversely to price, was 3.56 percent, down 3 basis points from late Tuesday.

The 30-year bond US30YT=RR was up 9/32 for a yield of 4.51 percent, down 2 basis points from late Tuesday.

"You never short a quiet market," said Russ Certo, co-head of the rates group at BroadPoint Capital in New York.

Analysts said the day's inflation data will support the case for the Fed to stick to the near-zero rate policy it adopted a year ago to combat the credit crisis and a deteriorating economy.

"The tame core rate will keep the Fed's stimulative policy in place," Barclays' Pond said.

Traders widely expect the U.S. central bank to leave alone an easy monetary stance after its policy-setting group, the Federal Open Market Committee, concludes a two-day meeting later Wednesday.

There has been speculation the Fed may upgrade its growth outlook and signal its intention to wind down measures that pumped hundreds of billions of dollars into the banking system in the aftermath of the credit crisis last year, analysts said.

The FOMC will release its policy statement about 2:15 p.m. EST (1915 GMT) (Editing by Andrea Ricci)