Australian bond futures prices are lower after US inflation in May was higher than expected.

The consumer price index rose 0.4 per cent in May for an annual rate of 2.1 per cent, the biggest 12-month price change since October 2012.

National Australia Bank senior currency strategist Emma Lawson said a higher inflation rate increased the likelihood of an interest rate rise and would keep the US Federal Reserve’s tapering of its economic stimulus measures in place.

“With the US labour market improving, and the Fed’s other mandate being stable prices, this type of inflation pick-up will make it difficult for the Fed to ignore,” she said.

At 0830 AEST on Wednesday, the September 2014 10-year bond futures contract was trading at 96.255 (implying a yield of 3.745 per cent), down from 96.285 (3.715 per cent) on Tuesday.

The September 2014 three-year bond futures contract was at 97.160 (2.840 per cent), down from 97.180 (2.820 per cent).

Financial markets are now focused on the outcome of the US Federal Reserve’s policy meeting, with an announcement due early on Thursday morning, Australian time.