Christine Lagarde announces early resignation as ECB president

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Christine Lagarde announces resignation

Who will lead the European Central Bank?

European Council President António Costa said the process of selecting a new ECB president would begin immediately. The leading candidates are former Dutch central bank governor Klaas Knot and former Bank of Spain governor Pablo Hernández de Cos.

The resignation announcement had little impact on financial markets. Analysts note that both potential successors have extensive experience, meaning investors do not currently expect major changes in the ECB's monetary policy.

However, Lagarde's decision has sparked debate among European politicians. Some members of the European Parliament believe that an early departure ahead of the French election could raise questions about the ECB's political independence. Others argue that the move will help ensure continuity in the central bank's leadership.

ECB faces new economic risks

The leadership change comes at a difficult time for the European economy. Rising oil prices due to the war with Iran are adding to inflationary pressures, while higher government bond yields, particularly in France, are increasing borrowing costs for businesses and households.

At its October 29 meeting, the ECB is expected to keep its deposit rate unchanged at 2.5%. However, analysts see the possibility of another rate hike as early as December if high energy prices continue to push inflation higher.

According to money market expectations, the ECB could raise interest rates three more times by the end of 2027, bringing the deposit rate to 3.25%. Such a level could further slow economic growth in the eurozone.

What will Christine Lagarde be remembered for?

Christine Lagarde became president of the European Central Bank on November 1, 2019, becoming the first woman to hold the position. She previously served as managing director of the International Monetary Fund and France's finance minister. By the time she announced her resignation, Lagarde had led the ECB for almost seven years. By her departure in February 2027, her tenure will have lasted seven years and three months.

One of Lagarde's biggest challenges was the COVID-19 pandemic. In March 2020, the ECB launched an emergency bond-buying program that eventually reached €1.85 trillion. The measures were designed to support the eurozone economy and prevent a financial crisis.

Lagarde later had to tackle a sharp rise in inflation caused by the post-pandemic economic recovery and the energy crisis. Between July 2022 and September 2023, the ECB raised interest rates ten times, bringing the deposit rate to a record 4%. However, the central bank faced criticism for reacting too slowly to the initial surge in prices.

Under Lagarde, the ECB also accelerated the development of the digital euro, a central bank digital currency intended to complement cash and existing electronic payment methods. However, the project had not been launched by the time she announced her resignation.

The World Economic Forum could appoint Lagarde as its chair, as previously reported.

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