MILAN/LONDON, Sept 20 (Reuters) - Euro zone short-dated government bond yields hit new multi-year highs and Germany's 10-year yield its highest since early 2014, after inflation data fuelled expectations of faster monetary tightening and Sweden surprised markets with a huge interest rate hike.

The jump in yields arrived at the start of a very busy week for central banks, with the U.S. Federal Reserve, Bank of Japan, Swiss National Bank and the Bank of England all holding policy meetings.

German producer prices rose in August at their strongest rate since records began in annual and monthly terms. Excluding energy, the year-on-year rise in producer prices came in at 14% in August.

Sweden's Riksbank raised rates by a full percentage point to 1.75% on Tuesday and warned that more was to come as it sought to get to grips with surging inflation. Markets had expected a 0.75% increase.

Germany's two-year yield climbed around 14 basis points to 1.749%, the highest since May 2011, and the five-year 15 bps to 1.86%, a level last seen in July 2011.

The 10-year German yield, which is less sensitive to central bank rate changes, rose around 16 bps to 1.954%, its highest since January 2014.

Italy's two-year yield rose 11 bps to 2.758%, its highest since mid-2013.

SOARING TREASURY YIELDS

Benchmark 10-year U.S. Treasury yields jumped to their highest level since 2011 overnight as investors prepare for the Fed meeting, while the two-year yield hit its highest since November 2007 in London trade.

“As ECB (European Central Bank) officials leave no doubt about their commitment to bring down inflation, terminal rate expectations keep on pushing higher,” Commerzbank analysts said in a note to clients.

The ECB euro short-term rate (ESTR) Forward for June 2023 hit 2.75%.

ECB Chief Economist Philip Lane said last week the central bank could raise rates into next year, and a recession could not be ruled out.

The exact number of further rate increases by the ECB will depend on upcoming macroeconomic data, ECB Vice-President Luis de Guindos said on Monday.

Italy’s 10-year yield rose around 15 bps to 4.23%, its highest since mid-June, with the spread between Italian and German 10-year yields at 225 bps.

Citi analysts said in a research note that the “10yr BTP-Bund (spread) could break past 240 bps in coming weeks with final election polls giving the right-wing coalition a majority of nearly two-thirds.”

Italy's right-wing bloc looks set to win a majority in both houses of parliament in next Sunday's election, although the absence of anti-euro rhetoric seen in the 2018 vote has reassured investors for now.

ING analysts said they expected the "signalling on quantitative tightening" to pick up in earnest in October.

ECB policymakers are likely to kick off a debate next month about whittling down the Bank's 4 trillion-euro bond pile, in a move that could trigger a sell-off in peripheral bonds.

Among new euro zone government bond sales, Austria has hired banks for a new four-year bond, according to a bond mandate seen by Reuters. Spain raised 5 billion euros via a syndicated sale of a new 20-year bond, the Spanish Treasury said.

(Reporting by Stefano Rebaudo and Tommy Reggiori Wilkes Additional reporting by Yoruk Bahceli Editing by Susan Fenton, Jane Merriman and Jonathan Oatis)