Christine Lagarde
The ECB says no decision has yet been made. Lagarde’s term expires in October 2027, but some fear that the far right could win the French presidential election in spring 2027, complicating the choice of a new head of Europe’s most important financial institution.
The Financial Times reported that Lagarde has not yet decided on the exact timing of her departure, but would like Macron and German Chancellor Friedrich Merz to be the key decision-makers on her successor. Before heading the ECB, she served as managing director of the International Monetary Fund from 2011 to 2019 and before that as French finance minister.
Market reaction
Initial market reaction to Lagarde’s possible departure was subdued. Bond yields and the euro were virtually unchanged at the beginning of trading. But later the euro declined slightly while the dollar strengthened.
“I don’t think it will have a big impact on the euro in the near term because there is still a lot to be discussed,” said Chris Turner, global head of markets at ING.
There are no official candidates for the job yet, but several names of potential ECB presidents are being discussed in ECB circles.
Possible candidates include former Dutch central bank governor Klaas Knot, Bank for International Settlements CEO Pablo Hernandez de Cos and Bundesbank chief Joachim Nagel.
Lagarde took office in 2019 and has been leading the ECB through an aggressive cycle of monetary tightening in 2022 and 2023 aimed at bringing inflation under control. But with inflation now close to the ECB’s target and interest rates expected to remain unchanged through 2026, Lagarde could leave the ECB at a relatively quiet time.
While the choice of Lagarde’s successor will depend on the leaders of all 21 eurozone countries, past experience shows that any successful candidate must win the support of both Germany and France to take the job.
