Lagarde steps down: the ECB president leaves on 7 February 2027 so she can speak freely

Christine Lagarde steps down as president of the European Central Bank on 7 February 2027, almost nine months before her term ends. She told the Governing Council and António Costa, the president of the European Council, on Thursday, 29 October, the ECB said. Her reason, she told reporters, is that she wants to speak freely on matters beyond monetary policy, which an ECB president cannot do.

The news came on the day the ECB left its rates unchanged, with the deposit rate at 2.50%, and as France’s borrowing costs sit well above Germany’s. EU leaders now have about three months, not a year, to agree on her successor.

Why Lagarde steps down early

An ECB president serves one eight-year term and cannot be reappointed. Lagarde took office in November 2019, so “the end of my term in any event would have been October 2027”, she said at the press conference, according to the ECB’s transcript.

She gave one reason for leaving sooner: she wants “the freedom of speech, the freedom of expression”. ECB officials have a duty of neutrality and comment only on monetary policy. “I don’t think that I can remain neutral,” she said. “I’m interested in the truth, and I see the truth being very often damaged, contradicted by misrepresentation.”

She did not say what she will do next. Reporters asked whether she would stand for office or take a side in French politics; she declined to go into the details. One asked whether leaving early in a year of national elections, France’s among them, could hurt the ECB’s independence. Lagarde answered that the bank’s governance “has proven its solidity” and that she would be fully in charge until 7 February.

Who will be the next ECB president?

The ECB has not named candidates, and neither has the EU. The successor will be appointed by the European Council, the EU’s heads of government, under Article 283 of the EU treaty, the ECB’s release says. The treaty asks the Council to decide by qualified majority, on a recommendation from EU finance ministers, after consulting the European Parliament and the ECB’s Governing Council.

Lagarde said “a process has already started to identify my successor” and that there are “plenty of excellent candidates”. The timetable is now short. She will chair two more policy meetings, on 17 December and in February.

The choice matters for markets because the ECB president sets the tone of the Governing Council’s debate and speaks for it between meetings. A new president will also take over during an energy shock, with inflation above target and a council that is debating rate rises.

A hold at 2.50%, and a debate about a rise

The ECB kept its deposit rate at 2.50%, its decision shows. Energy prices “have continued to rise”, it said, pushing inflation up and growth down, while financing conditions have tightened.

The decision was closer than the statement suggests. There were views along the lines of “maybe now, why not?”, Lagarde said, before the council agreed unanimously to wait for more data. She described the current situation as one “which could have warranted a hike”. As the minutes of September’s meeting showed, the council raised rates to 2.50% then without promising another rise.

Markets expect one in December. On data to 29 October, futures priced a 79.0% chance of a rise at the 17 December meeting, Central Bank Watch’s figures show.

French bond yields and the euro

Part of the work is being done by bond markets. Average 10-year government bond yields in the euro area have risen by about 35bp since the cut-off for the ECB’s September forecasts, Lagarde said, which tightens financing conditions without a rate rise.

France stands out. Its 10-year yield closed at 4.894% on 29 October, the Banque de France’s benchmark shows, down 4bp on the day. Germany’s was 3.39%, the Bundesbank’s figures show, so France pays about 150bp more to borrow for 10 years. That gap was 139bp on 19 October, after the riots we wrote about then.

Asked which measures the ECB watches in the French market, Lagarde said long-term yields have risen around the world, more in some countries than in others, and “we look at everything”. She gave no level that would make the bank act.

The euro barely moved on the news. Its reference rate was $1.1130 on 29 October, against $1.1133 the day before, the ECB’s daily rates show.

What to watch

• The candidates. Names will come from national governments; the European Council decides.
• The ECB’s next decision, 17 December, with new staff forecasts, Lagarde’s second-to-last meeting.
• French bond yields, as France heads towards its 2027 presidential election.