By Harry Robertson

LONDON () -Euro zone government bond yields rose to their highest level in around a month on Monday as investors continued to try to gauge the outlook for central bank rate cuts in 2025.

The Federal Reserve last week put upward pressure on U.S. government bond yields, which set the tone for other markets around the world, when policymakers said they now expect to cut rates twice in 2025, down from a previous estimate of four cuts.

Germany’s yield, the benchmark for the euro zone, rose to 2.327% on Monday, the highest level since Nov. 22, up around 4 basis points (bps). Yields move inversely to prices.

Trading volumes were lower due to traders being off over the holiday season, potentially accentuating price moves.

European Central Bank (ECB) President Christine Lagarde said the euro zone was getting very close to reaching the central bank’s medium-term inflation goal, according to an interview published by the Financial Times on Monday.

The ECB cut rates for a fourth time to 3% this month but euro zone bond yields rose after Lagarde struck a slightly tougher tone than expected, saying the fight against inflation was not over.

Lagarde told the FT that headline inflation was at 2.2%, but services inflation remained at 3.9% and “is not budging much”.

Irish central bank chief Gabriel Makhlouf warned that elements of services inflation in the euro zone were concerning.

Germany’s two-year bond yield, which is sensitive to ECB rate expectations, was last up 3 bps at 2.071%.

Italy’s 10-year yield rose 5 bps to 3.50%, after hitting 3.503%, its highest since Nov. 25. The gap between Italian and German yields stood at 117 bps.

Investors face an uncertain 2025, with U.S. President-elect Donald Trump’s policies a wild card.

Money market pricing on Monday showed investors expect around 115 bps of rate cuts from the ECB next year, little changed from Friday.