The flooding across Central Europe over the past week will likely weigh on activity in September, but we think that the economic impact will be relatively short-lived and won’t shift the monetary policy outlook across the region. Meanwhile, the escalation of the conflict between Israel and Hezbollah after the recent attacks in Lebanon has added to downside risks to Israel’s economy and upside risks to inflation. If anything, we think the likelihood of the central bank hiking interest rates in the coming months has increased.
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