The ECB and the Fed

By: Charles Wyplosz, Graduate Institute of International Studies

Facing different situations, the Fed and the ECB muddle through, each in its own way.

Fannie and Freddie on the rope

By: Wolfgang Münchau

When house price are expected to decline by 30%, some strange things are happening

European Parliament wants ECB to change inflation target

Beres and Langen propose higher target, target band, plus official inflation forecast; Trichet rejects the idea; also hints that second-round effects are finally happening; oil price falls below $130, though no consensus on what this means; Belgium’s King Albert II, meanwhile, rejects the resignation of Yves Leterme, and appoints mediators.

Inflation up everywhere

US inflation reaches 5%, as Fed officially starts to worry; there are first signs that sovereign wealth funds are shifting out of dollars into euros; European car sales were over 7% down in June over last year; Spain has become the 23rd European country to ratify the Lisbon Treaty; in France, meanwhile, the vote over Sarkozy’s constitutional reform will be unfomfortably tight.

Sarko’s diplomacy upsets the Irish

The Irish are up in arms over Sarkozy’s statement, made in private, that they must vote again; euro rises, and equity markets tank as investors are having second thoughts about the Freddie and Fannie bailout; Spain suffers its largest bankruptcy, a a house builder goes belly up; meanwhile, another record in Belgium: The Leterme government lasted for less than half the time that it took to negotiate the coalition.

Sarkozy calls on the Irish to make up their mind or risk relegation

French president says he will propose a solution either in October or December; warns of a two-speed Europe; MEPs say Sarkozy has been the best prepared EU president ever; there are indications of a severe slowdown in euro area industrial output; latest wage rounds suggest no immediate threat from second-round effects; Belgian and French lawyers, meanwhile, have been preparing an accession treaty for Francophone Belgium’s eventual integration into France.

Draghi and Tremonti clash over Robin Hood tax

Bank of Italy governor steps up his criticisms of Berlusconi government’s fiscal policy, amid concern about wider economic impact; Kenneth Rogoff warns that the economic crisis is going to get very severe indeed; former St Louis Fed chairman says Freddy Mac technical insolvent; another inflation hawk is set to join the ECB’s governing council; Jean-Claude Juncker, meanwhile, promise more pressure on China to make yuan more flexible.