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Euro zone inflation stabilized in the European Central Bank's "danger zone" in February but did not fall as expected, making it less likely the ECB will loosen monetary policy further at its monthly meeting next week. European Union statistics office Eurostat estimated on Friday that consumer prices in the 18 countries sharing the euro rose an annual 0.8 percent this month. Fears the bloc may be at risk of deflation as it struggles to recover from its debt crisis have raised expectations the ECB will use interest rates or other policy tools to give the economy further support. "The higher than expected inflation numbers reduce the chances of an ECB rate cut at next week's meeting, and we maintain the view that ... the central bank will keep rates on hold," said Nick Kounis, head of macro research at ABN AMRO.
Consumer sentiment rose marginally in February even as concerns about the extreme weather persisted, a survey released on Friday showed. The Thomson Reuters/University of Michigan's final reading on the overall index on consumer sentiment for February came in at 81.6, slightly above the 81.2 in both the preliminary February number and the final January reading. "The most significant implication is not whether consumers have correctly assessed the weather's negative impact on the economy, but the resilience consumers have demonstrated in the face of the polar vortex as well as higher utility bills and minimal employment gains," survey director Richard Curtin said in a statement.
European stocks fell on Friday and the euro rose to its highest level this year after euro zone inflation unexpectedly held steady this month, cooling growing expectations the European Central Bank might ease monetary policy as early as next week. That followed the biggest weekly fall in China's currency for two decades and came ahead of the first estimate later in the day of U.S. economic growth in the fourth quarter of last year. Investors also kept close tabs on Ukraine, where the central bank capped bank withdrawals and banned trading of certain currency contracts, as the acting President dismissed the army chief of staff and Russian helicopters were dispatched to Crimea. Diminishing prospects of an interest rate cut by the ECB as early as next week was the biggest driver, though.
Free-trade talks between the United States and the European Union are in danger of being derailed by populist groups opposing everything from globalization to multinationals, EU ministers and business leaders said on Friday. The rise of anti-EU parties, reports of U.S. spying in Europe and accusations that a trade pact would pander to big companies have combined to erode public support for a deal that proponents say would dramatically increase economic growth. "We are grappling with people who are anti-European, who are anti-American, who are anti-free trade, who are anti-globalization and who are anti-multinational corporations," Finland's minister for Europe and trade, Alexander Stubb, told his EU counterparts and business leaders at a meeting in Athens. With the euro zone's economy barely out of a two-year recession, EU governments see a trade deal with the United States as the best way to create jobs.