ECB leaves rates unchanged, Lagarde's resignation opens race for presidency
Summary
- The ECB Governing Council maintained its key interest rates, keeping the deposit rate at 2.50%, following a previous hike in September, amid rising energy prices and stable core inflation.
- Christine Lagarde announced her resignation as ECB President effective February, nine months before her term's official end, potentially to influence French politics and possibly pursue a role at the World Economic Forum.
- Potential successors to Lagarde include BIS General Manager Pablo Hernández de Cos and former Dutch Central Bank Governor Klaas Knot, with significant leadership changes expected at the ECB.
- The new ECB leadership will face challenges such as France's debt issues, competition from China, and strained US relations, making the selection of Lagarde's successor crucial for market stability.
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Automatic translation: Originally published in Finnish 29/10/2026, 14:33 GMT. Give feedback here.
The ECB Governing Council kept its policy rates unchanged on Wednesday following September's hike, leaving the deposit facility rate at 2.50%. On the same day, President Christine Lagarde announced that she will step down from her position in February. Her eight-year term was not set to end until next October.
The central bank's rate decision was expected. Energy prices have continued to rise, and according to the ECB, the energy shock has grown both in scale and duration. This increases the risk that inflation accelerates and growth slows down. On the other hand, core inflation has remained more or less stable, and wages have not yet reacted significantly to the shock. In addition, financial conditions have tightened since September (see the chart below), meaning they are already helping to curb inflation. In the press conference, President Lagarde stated that the ECB is now paying particular attention to "second-round" inflation effects, but there have been no major revisions to the stance since the September meeting.
The threshold for new hikes is relatively high as long as the increase in energy prices is not reflected in wages. A rate hike in December remains on the table in market expectations, but it is quite possible that the ECB will wait for evidence from early-year wage negotiations before making rate hikes.
Indices describing eurozone financial conditions
Source: ECB
French politics behind Lagarde's departure
Before the meeting, Lagarde announced that she will leave her post in February, nine months before the official end of her term, but did not drop any hints about her next role. According to The Wall Street Journal, however, she has discussed the presidency of the World Economic Forum. According to the paper, French domestic politics is also behind the departure. Lagarde has linked her early exit to a desire to influence next year's presidential election, although she does not intend to run herself. She told the Governing Council that she wants to speak more freely about matters outside monetary policy as well.
The timing allows President Emmanuel Macron to influence the choice of a successor before his term ends in May. Eurozone leaders have feared that a victory by EU-critical Marine Le Pen, who leads in the polls, could disrupt the appointment process.
Mentioned as potential successors to Lagarde are, among others, Bank for International Settlements (BIS) General Manager Pablo Hernández de Cos and former Dutch central bank Governor Klaas Knot. In addition, the seats of Chief Economist Philip Lane and Isabel Schnabel will become vacant on the Executive Board, meaning the ECB's leadership will see a broad turnover. The new leadership will face an economy that has weathered the war in Iran reasonably well. However, longer-term risks include France's debt concerns, cheap imports from China, the scramble for market shares in global trade, and strained relations with the United States. For the markets, therefore, the selection of a successor is a more important issue than today's rate decision.
