Euro zone bond yields dip before inflation data

LONDON, Feb 4 (Reuters) - Euro zone government bond yields inched lower on Wednesday, ahead of preliminary bloc-wide inflation data later, while a tense mood across broader markets limited price movement.

Germany's 10-year Bund yield DE10YT=RR, which serves as a benchmark for the wider euro zone debt market, was down about 1.5 basis points at 2.875%, having risen by nearly 7 basis points in the prior three days, as have 30-year yields DE30YT=RR.

Long-dated bond prices were a touch firmer, leaving the 30-year yield down 1.5 bps at 3.531%, only marginally below Tuesday's peak of 3.559%, the highest since 2011.

HEADLINE INFLATION FORECAST TO EASE

Flash harmonised euro zone inflation data for January is due later in the day. Economists polled by Reuters expect the core rate, which excludes food, energy, alcohol and tobacco, to have risen by 2.3% last month, at the same pace as December, and just above the European Central Bank's target rate of 2%.

Headline inflation is expected to ease to 1.7% from 1.9%, in part due to energy base effects.

"We would note that January is likely to be a distorted number and the European Central Bank has already said it will look through a short-term inflation undershoot," RBC analysts said in a note.

The ECB is set to announce policy on Thursday and is likely to keep its deposit rate on hold at 2% for the fifth straight meeting, while ECB chief Christine Lagarde is likely to reiterate that the central bank is in a "good place", and will maintain a meeting-by-meeting approach to monetary policy.

Money market traders expect the ECB to keep policy rates on hold through 2026.