Christine Lagarde will step down early as president of the European Central Bank (ECB), the central bank said today (Thursday). Her seven years in the job took in a pandemic, record euro area inflation and 10 straight rate hikes.
Her last day will be February 7, 2027, almost nine months before her eight-year term ends. The Governing Council thanked her with a long standing ovation, according to the ECB, and the European Council will now appoint her successor.
The exit lands mid-cycle for euro traders. The deposit rate stands at 2.50% after quarter-point increases in June and September, and futures pricing points to another rise in December.
London's trading industry is coming home!
A Pandemic Four Months In
Lagarde became the first woman to lead the ECB on November 1, 2019. A lawyer and former French finance minister, she had also swum for France's national synchronized swimming team as a teenager.
She took over from Mario Draghi, whose ECB had pushed the deposit rate further below zero in a split vote in 2014. Covid-19 reached Europe four months into her term.
At her first crisis press conference, on March 12, 2020, she said the ECB was "not here to close spreads."
Italy's 10-year bond yield climbed more than 60 basis points that day, and Lagarde walked the comment back in a CNBC interview hours later. Retail traders piled in that month, and GAIN Capital clients alone traded $388.6 billion in March 2020, up 95% from February.
On March 18, six days after that press conference, the ECB launched a EUR 750 billion pandemic emergency purchase program, which grew to EUR 1.85 trillion by December 2020.
Ten Hikes to a Record 4%
The deposit rate stayed at -0.50% through the pandemic, in a regime where the bank had once even weighed paying banks to take its long-term loans.
Then annual euro area inflation reached 10.6% in October 2022. The ECB raised rates 10 times in a row from July 2022, and by September 2023 the deposit rate stood at 4.00%, the highest since the euro's launch in 1999.
Eight cuts between June 2024 and June 2025 brought it back to 2.00%, before energy prices pushed the bank into hiking again this year. The euro area meanwhile grew from 19 to 21 members, with Croatia joining in 2023 and Bulgaria in January 2026.
One promise is still open. In November 2020 Lagarde said the ECB would likely launch a digital euro within two to four years. Six years later, the European Parliament has only just voted, in July, to open talks with member states on the law.
The ECB's case rests on how Europeans pay. Only 24% of euro area retail payments were made in cash in 2023, according to figures the ECB cited last year, and the bank now points to 2029 as the earliest issuance date.
Three Board Seats Open in Five Months
Executive Board member Isabel Schnabel leaves on January 3 to join the International Monetary Fund (IMF), and chief economist Philip Lane's term ends in May.
Spain's Pablo Hernández de Cos and the Netherlands' Klaas Knot have been named in reports as the main candidates for the presidency. The earlier exit also gives French President Emmanuel Macron a say before France elects his successor in the spring.
Lagarde will be the first ECB president since Wim Duisenberg, who left in 2003, to step down before completing an eight-year term.
This article was written by Damian Chmiel at www.financemagnates.com.
Source: Finance Magnates
