* Federal Reserve gives statement Wednesday
* Putin comments reduce East-West tension
* Consumer Price Index up 0.1 pct in Feb.
* Fed buys $1.15 bln in Treasuries maturing 2036-2043
By Sam Forgione
NEW YORK, March 18 (Reuters) - U.S. Treasuries yields edged lower on Tuesday on uncertainty ahead of the Federal Reserve’s two-day policy meeting and lingering concerns that East-West tensions surrounding Ukraine could escalate.
The Fed is expected to continue to reduce its monthly bond purchase program, but also alter its forward guidance when it gives its statement on Wednesday after its meeting. The meeting will be the first presided over by Fed Chair Janet Yellen.
“The message (Yellen) wants to convey is probably, ‘We’re still accommodative but we’re still tapering, and we’re flexible,’ which is a very complicated message,” said Kathy Jones, fixed income strategist at Charles Schwab in New York.
Traders said uncertainty over the outcome of the Fed meeting spurred some safe-haven demand for Treasuries.
The Fed previously said that it would not raise interest rates until joblessness fell to at least 6.5 percent, a pledge that policymakers thought would hold until at least mid-2015. But that rate hit a five-year low of 6.6 percent in January, before rising to 6.7 percent in February.
Meanwhile, Russian President Putin, while approving plans to make Crimea part of Russia, said his country did not want Ukraine to split further, which reduced some fears of an escalation in East-West tensions.
Moscow’s seizure of Crimea, denounced by the West as illegal and in breach of Ukraine’s constitution, has caused the most serious East-West crisis since the end of the Cold War.
On Monday, the United States and the EU imposed sanctions on a handful of officials from Russia and Ukraine accused of involvement in Moscow’s seizure of the Black Sea peninsula, most of whose 2 million residents are ethnic Russians.
“It was encouraging this morning to hear Putin step down his comments, but it still remains to be seen how this is going to be played out,” said George Rusnak, national director of fixed income for Wells Fargo Private Bank in Philadelphia.
U.S. economic data on inflation in February, meanwhile, largely met expectations, while weaker-than-expected housing starts last month had a muted impact on Treasuries prices.
The Labor Department said on Tuesday its Consumer Price Index nudged up 0.1 percent in February, in line with economists’ expectations, as a decline in gasoline prices offset an increase in the cost of food.
The Commerce Department, meanwhile, said U.S. housing starts slipped 0.2 percent in February, marking the third straight monthly decline, while a rebound in building permits offered some hope for the housing market.
“The data was pretty benign,” said Rusnak of Wells Fargo.
The Federal Reserve bought $1.15 billion in Treasuries maturing between Feb. 2036-Nov. 2043 on Tuesday, which had a muted impact on Treasuries prices.
On Wall Street, major stock indexes gained following Putin’s comments. The benchmark Standard & Poor’s 500 was last up 0.66 percent.
The 10-year U.S. Treasury note was last up 7/32 price to yield 2.672 percent, down slightly in yield from late Monday, when the yield was at 2.70 percent. Bond yields move inversely to their prices.
The 30-year U.S. Treasury bond was last up 5/32 in price to yield 3.62 percent, down slightly in yield from late Monday, when the yield was at 3.63 percent.