May 21 (Reuters) - U.S. Treasury yields dipped on Tuesday as investors waited on minutes from the Federal Reserve’s latest policy meeting on Wednesday for any fresh clues on when the U.S. central bank is likely to begin cutting interest rates.

Benchmark 10-year yields have fallen from five-month highs reached in late April as data weakens and inflation shows signs of easing.

“There’s reason to believe that the rapid pace (in inflation) that we saw in Q1 can’t continue and won’t continue going forward,” said Michael Lorizio, senior fixed-income trader at Manulife Investment Management in Boston.

Lower-than-expected consumer price data and weaker retail sales data for April last week boosted expectations the Fed will begin cutting rates in September. But those expectations have since been pared back as Fed officials stress the need to see further progress.

Fed policymakers on Tuesday said it is prudent to wait several more months to ensure that inflation really is back on a path to the 2% target before commencing interest rate cuts.

Economic surprise indices are easing, after increasing in the first quarter, which could support the bond market if it continues.

“The data looks like it’s beginning to slip and certainly slipping significantly from our expectations, so I think that should be supportive of yields in the near term unless we see once again the data releases reverse,” Lorizio said.

The Fed minutes from its April 30-May 1 meeting due on Wednesday may reflect more concern about higher-than-expected inflation in the first quarter, as the meeting was held before last week’s consumer price inflation report.

The U.S. central bank signaled at the meeting that it is still leaning towards eventual reductions in borrowing costs, but acknowledged that disappointing inflation readings could make those rate cuts a while in coming.

The minutes may also offer more detail on the Fed's plans to slow down the reduction in its balance sheet.

The Fed announced it will scale back the pace at which it is shrinking its balance sheet starting on June 1, allowing only $25 billion in Treasury bonds to run off each month versus the current $60 billion. Mortgage-backed securities will continue to run off by up to $35 billion monthly.

Benchmark 10-year note yields were last down 2 basis points on the day at 4.416%. They have fallen from 4.739% on April 25, which was the highest since Nov. 2.

Two-year yields fell half a basis point to 4.833%. They reached 5.045% on April 30, the highest since Nov. 14.

The inversion in the yield curve between two-year and 10-year yields widened one basis point to minus 42 basis points.

(Reporting By Karen Brettell; Editing by Sharon Singleton and Nick Zieminski)