Lagarde to leave ECB in February, starting successor search now

Christine Lagarde will stop leading the European Central Bank in February 2027. The move ends her seven-year tenure ahead of schedule and changes the timeline for selecting the next head of the eurozone's central bank.

The ECB confirmed on Wednesday that Lagarde informed the Governing Council and European Council President Antonio Costa of her decision. She will step down on February 7, 2027. Her original term began on November 1, 2019, and would have run through the end of October 2027.

Costa said the search for a replacement begins immediately. He stated that the appointment process would proceed without delay to reach a timely decision. The leaders of the 21 eurozone countries select the ECB president.

The bank has not provided a specific reason for the early departure. Observers have speculated that Lagarde may be leaving to allow EU leaders to choose a successor before spring elections in France. A victory for the eurosceptic far-right in those elections could influence the selection process.

Lagarde, a former French finance minister and head of the International Monetary Fund from 2011 to 2019, expressed satisfaction with her time at the institution. In a short video shared on social media, she said she leaves with a sense of good work done and an ECB that is fit for the future.

Costa praised her leadership during a period marked by a global pandemic, a war in Europe, energy crises, and inflation shocks. He described her stewardship as steady and determined, noting that it helped safeguard stability and the resilience of the euro area.

The announcement arrives before a key ECB meeting this week. The bank is expected to keep its deposit rate at 2.5%. It is also likely to signal that rates may rise again before the end of the year. The ECB has raised interest rates twice since June to curb inflation driven by the energy shock from the Iran war.

The meeting will also focus on the fiscal and political crisis in France, the eurozone's second-largest economy. French bond yields rose to their highest level in 25 years last week. This spike followed a deadlock over next year's budget and recent protests that included calls for more public spending and instances of violence.

Speculation has grown that the ECB might use its Transmission Protection Instrument, a tool that allows the bank to buy bonds of a member state if yields rise uncontrollably. Most observers believe France's current problems do not yet meet the strict conditions required for its use.