The European Central Bank (ECB) has highlighted ongoing uncertainty in the eurozone economy, with growth and inflation outlooks remaining highly unpredictable due to global trade conflicts and geopolitical tensions. ECB policymaker Olli Rehn emphasized on Friday that while recent economic data have shown positive surprises, external risks could still disrupt the euro area’s recovery.

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Geopolitical and Trade Risks Affecting the Eurozone

Speaking to reporters in Helsinki, Finland, Rehn noted that trade wars and global political instability may continue to pose negative surprises for the eurozone. “Despite recent positive growth surprises, the geopolitical situation and the ongoing trade war may still bring negative surprises for the eurozone,” he said.

These factors contribute to a volatile economic environment for the 20 countries using the euro, making policy decisions challenging for the ECB.

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ECB Policy and Economic Projections

The ECB recently kept its policy rates steady, signaling a cautious approach to monetary policy amid uncertain economic conditions. At the same time, the central bank revised some of its growth and inflation projections upward, reflecting stronger-than-expected economic performance in certain sectors.

However, the persistence of trade tensions and geopolitical risks—including disputes between major global economies—could undermine the eurozone’s growth trajectory and inflation stability. Analysts suggest that the ECB will continue to monitor developments closely and adjust its monetary policy on a meeting-by-meeting basis.

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Outlook for the Eurozone Economy

Despite signs of resilience, the eurozone faces several challenges:

• Potential disruptions from ongoing global trade conflicts.
• Geopolitical tensions affecting investment and consumer confidence.
• Uncertainty in sectors exposed to international markets, including manufacturing and exports.

Rehn’s comments underscore the need for vigilance as policymakers balance growth support with inflation control. Economists warn that any escalation in trade or geopolitical disputes could quickly affect euro area growth forecasts for 2026 and beyond.

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Conclusion

The outlook for the eurozone remains highly uncertain, with both growth and inflation susceptible to external shocks. While recent data have been encouraging, ECB policymaker Olli Rehn cautions that the effects of trade wars and geopolitical tensions could still bring negative surprises, highlighting the challenges faced by the ECB in navigating a complex global economic landscape.