Annual inflation in the euro zone rose for a third straight month to reach 2.4% in December, statistics agency Eurostat said Tuesday.

The reading was in line with the forecast of economists polled by Reuters and marked an increase from a revised 2.2% print in November. Core inflation held at 2.7% for a fourth straight month, also meeting economists’ expectations, while services inflation nudged up to 4% from 3.9%.

Headline inflation was widely expected to accelerate after hitting a low of 1.7% in September, as base effects from lower energy prices fade. The full extent of increases in the reading — along with persistence in services and core inflation — will be closely watched by the European Central Bank, which markets currently expect to cut interest rates from 3% to 2% across several trims this year.

The pace of price rises in the euro zone’s largest economy, Germany, hit a higher-than-expected 2.9% in December, according to figures published separately this week. Inflation in France meanwhile came in at 1.8% last month, below a Reuters analyst poll forecasting a 1.9% print.

The euro extended early-morning gains against the U.S. dollar following the print, trading 0.37% higher at $1.0428 at 10:13 a.m. in London. Traders are assessing whether the euro could decline to parity with the greenback this year, if the U.S. Federal Reserve proves significantly more hawkish than the ECB.

Haig Bathgate, director of Callanish Capital, told CNBC’s “Squawk Box Europe” that ECB policymakers would not be overly concerned by a hotter monthly inflation reading, as long as it was broadly in line with expectations.

“There’s now a lot more predictability in a lot of the data series we’re seeing… the direction of travel of rates [lower] in Europe is much more predictable than say, the U.K.,” Bathgate said Tuesday.

While markets have frontloaded pricing for rate cuts toward the start of the year, Jack Allen-Reynolds, deputy chief euro zone economist at Capital Economics, said the stickiness of services inflation meant that the ECB was “likely to keep cutting interest rates only slowly even as the economic outlook remains poor.”

“Most important for the monetary policy outlook is that core inflation was unchanged at 2.7% for the fourth consecutive month… This won’t stop the ECB from cutting interest rates further,” Allen-Reynolds said in a note.

“The high level of services inflation is partly due to temporary effects that should fade this year. Meanwhile, the labor market has loosened, wage growth is slowing and the growth outlook is weak.”

The euro zone economy grew by 0.4% in the third quarter, but economists warn that political instability, ongoing manufacturing weakness and the potential for escalating trade tensions under the incoming administration of U.S. President-elect Donald Trump have clouded the outlook for 2025.

President-elect Donald Trump is considering a plan that still would apply tariffs to all nations but narrow the focus to a select set of goods and services, according to a Washington Post report.

The new approach to tariffs likely wouldn’t be as powerful as Trump’s earlier ideas but still would cause major changes to global commerce, the paper said, citing people familiar with Trump’s thinking.

The report comes amid concerns that the incoming president’s insistence on imposing universal tariffs of 10% or 20% and specifically targeting China and Mexico would cause another spike in inflation.

During Trump’s first term, duties on a broad range of imports did little to raise prices broadly and in fact were kept in place when Joe Biden took over as president. However, economists worry that conditions are different now and aggressive tariffs would have a greater impact.

The Post report said it’s still not clear which sectors would be affected by the plans, though early discussions are looking at various industrial metals, medical supplies and energy.

The U.S. is running a $74 billion monthly trade deficit that exploded during the Covid pandemic.

UK firms are planning to raise prices to cover higher tax payouts as confidence among businesses tumbled to its lowest level since the market-rocking “mini-budget” crisis of fall 2022, according to a survey by the British Chambers of Commerce.

The trade group said sentiment had “declined significantly” in its largest poll since the Labour government’s debut budget last October, which included a hike in the amount many employers pay out in National Insurance (NI), a tax on earnings. 

The BCC said 63% of businesses cited tax as a worry in the survey, up from 48% in the third quarter. More than half (55%) said they expect prices to go up in the next three months, primarily due to higher labor costs.

The percentage of companies saying they expected turnover to increase in the next twelve months fell to 49%, from 56%. Concerns about inflation and interest rates remained roughly steady.

The BCC cited firms across hospitality, manufacturing, construction and healthcare expressing worries about how they would cover additional costs and saying they would likely scale back investment.

“We recognize what [Reeves] said, that she’s got to increase taxes to fill her black hole, but what we need to see her do now is mitigate against that. What are we going to do to drive the economy?” Shevaun Haviland, head of the BCC, told CNBC’s “Squawk Box Europe” on Monday.

“Businesses are going to have to shoulder this tax increase, but what we want to see her do is act, and they need to act quickly. It’s important that they’re putting strategies in place, industrial strategy, trade strategy, infrastructure plan, for later on this year, but we need to see action now.”

U.K. borrowing costs have climbed following the October 2024 budget, exceeding the levels they spiked to following the “mini-budget” of September 2022, which saw then-Prime Minister Liz Truss announce sweeping, uncosted tax cuts.

However, economists say the recent rise in bond yields is not equivalent to the surge seen in 2022 as the moves have been significantly less dramatic and the macro backdrop — including a cooling of inflation — has changed.