Indian government bond yields were lower on Thursday, tracking a decline in U.S. peers, following comments from a Federal Reserve official about the timing of possible interest rate cuts.

India's benchmark 10-year yield was at 7.0872% as of 10:20 a.m. IST, following its previous close of 7.1110%.

The U.S. yields eased on Wednesday after Chicago Fed President Austan Goolsbee said the central bank's path back to its 2% inflation target rate would still be on track even if price increases run a bit hotter than expected over the next few months.

The Fed official also said that the central bank should be wary of waiting too long before it cuts interest rates.

The U.S. central bank last month kept interest rates unchanged in the 5.25% to 5.50% target range, where it has been held since last July.

The 10-year U.S. yield touched a high of 4.33% on Wednesday as a higher-than-expected rise in inflation print deferred rate cut expectations. The 10-year yield was last at 4.23% in Asian hours.

The market was disappointed after the U.S. inflation data as expectations were for a lower print, said Deepak Agrawal, debt chief investment officer at Kotak Mahindra Mutual Fund.

"Given the data, the effective expectation of the first cut is getting pushed to June 2024 from March/May 2024."

Domestic debt market participants have also pushed their expectations for the start of rate cuts by at least two months following the Reserve Bank of India's hawkish tone at the latest policy meeting, as reflected in the overnight index swap market.

Last week, the RBI left interest rates unchanged at 6.50% and reiterated its commitment to meet its 4% inflation target.

Traders also await the last central government debt auction for this financial year, due on Friday. New Delhi aims to raise 300 billion rupees ($3.61 billion) via bond sale. ($1 = 83.0080 Indian rupees) (Reporting by Bhakti Tambe; Editing by Eileen Soreng)