Lagarde to exit ECB nine months before term ends

Christine Lagarde will leave her post as president of the European Central Bank nine months before her term was scheduled to end. The ECB announced on Thursday that she will step down on February 7, 2027. Her original tenure was set to conclude at the end of October 2027.

The governing council issued a statement thanking Lagarde and gave her a standing ovation during its Thursday meeting. In a video message posted to social media, Lagarde described serving at the ECB as a "great pride and huge privilege." She stated that she leaves the institution with a "sense of good work done" and an organization that is "fit for the future."

Lagarde joined the ECB in late 2019. During her tenure, the bank managed monetary policy through the start of the pandemic, the economic fallout from the Russia-Ukraine war, Middle East conflicts, and trade tensions with the United States. The eurozone is currently experiencing weak growth and inflation that remains above the central bank's target.

The early departure begins the process to select a new head of the ECB. The European Council holds the power to appoint the position. Potential candidates include Klaas Knot, the former president of the Dutch central bank. Other names mentioned include Pablo Hernández de Cos, a Spanish banker, Joachim Nagel, the president of the German central bank, and Nadia Calviño, who leads the European Investment Bank.

Holger Schmieding, chief economist at Berenberg bank, suggested the timing relates to French politics. He noted that the European Union is attempting to manage the risk that Marine Le Pen could win the French presidential election in April or May 2027. Le Pen is a long-term political adversary of President Emmanuel Macron, the current centrist leader of France. Lagarde's successor will be appointed while Macron remains in the Élysée Palace.

Lagarde has also been identified as a possible candidate to lead the World Economic Forum. The forum holds its annual meeting in Davos each January. Its founder, Klaus Schwab, stepped down last year following accusations of financial and ethical misconduct, claims he has denied.

The ECB is expected to keep interest rates on hold on Thursday. In her video message, Lagarde appeared with two plasters on her face, which she attributed to a small surgery earlier in the week. She advised viewers to follow doctors' orders and get their skin checked regularly.