ECB President Lagarde resigns as Europe faces mounting challenges
TLT•Christine Lagarde will step down as European Central Bank president on February 7, ahead of a French presidential election. The ECB is widely expected to keep its deposit rate at 2.5% on Thursday, while markets price in three rate increases by the end of next year.
1. Resignation and succession
Lagarde said she would leave the ECB on February 7, ending months of speculation about her future. She said she was leaving with a sense of good work done and an ECB fit for the future. A source with direct knowledge said she wanted to weigh in on political matters in France and globally; as ECB president, she was expected to remain neutral.
2. Reactions to early exit
German parliamentarian Markus Ferber said the early resignation sent “the wrong signal” amid high inflation, nervous bond markets and looming elections. DIW president Marcel Fratzscher said Lagarde was showing a “strong sense of responsibility towards Europe.” The process to choose her successor is set to begin immediately, with former central bank governors Klaas Knot and Pablo Hernandez de Cos widely seen as frontrunners.
3. Rates and bond pressures
The ECB is balancing inflation risks from an oil-price shock linked to the Iran war against rising government bond yields, especially in France, which have pushed up borrowing costs. It is widely expected to hold its deposit rate at 2.5% on Thursday, while another increase, potentially in December, remains likely. Money markets are pricing in three more increases by the end of next year, taking the rate to 3.25%.
