MUMBAI, June 13 (Reuters) - Indian government bond yields slipped on Thursday, with the 10-year yield below 7%, tracking the drop in U.S. peers after softer-than-expected U.S. inflation data boosted bets of lower interest rates despite the Federal Reserve projecting only one cut this year.

India's benchmark 10-year yield was at 6.9961% as of 10:00 a.m. IST, following its previous close of 7.0121%.

"For the benchmark yield, 7% may now become the upside, unless there is a fresh negative trigger," a trader with a primary dealership said.

U.S. yields dropped on Wednesday, with the 10-year yield touching 4.25%, its lowest level in over two months, after retail inflation reading came in cooler than expected, raising bets of rate cuts by the Fed.

The decline was partly reversed after the Fed maintained hawkish guidance and slashed its forecast to only one rate cut of 25 basis points in 2024, down from three cuts forecast in March as a 2% inflation goal may be achieved more slowly than expected.

U.S. consumer prices were unchanged month-on-month in May, following a 0.3% increase in April and below the 0.1% estimate, while for 12 months through May, it advanced 3.3% versus 3.4% in April and a similar market expectation.

Even though the Fed sees only 25 bps of cut, the futures market is pricing in 44 bps of cuts in 2024, with the odds for such an action in September rising to 61% from 53%, according to the CME FedWatch tool.

Overall, there is nothing that rules out a September rate cut and if employment growth edges down again and the May inflation data is replicated, then two rate cuts this year is still the most likely outcome, Capital Economics said in a note.

Back home, India's retail inflation rate eased slightly in May to 4.75% from 4.83% in April and lower than 4.89% forecast in a Reuters poll. (Reporting by Dharamraj Dhutia; Editing by Eileen Soreng)