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European Central Bank (ECB) President Christine Lagarde is planning to step down before the end of her eight-year term in October 2027, a move intended to allow outgoing French President Emmanuel Macron and German Chancellor Friedrich Merz to influence the selection of her successor, according to sources familiar with the matter.
The potential for a far-right victory in the French presidential election scheduled for spring 2027 is a key factor driving Lagarde’s decision, as it could complicate the appointment of the next head of Europe’s central bank. Lagarde reportedly wants Macron and Merz to play a central role in identifying her replacement, given the importance of securing support from both France and Germany for any candidate.
The ECB acknowledged the reports but stated that Lagarde “is totally focused on her mission and has not taken any decision regarding the end of her term.” However, this response marks a shift from previous statements. Last year, when the Financial Times first suggested Lagarde might leave early, the ECB affirmed she was “determined to complete her term.”
Initial market reaction to the news has been muted, with bond yields and the euro remaining largely unchanged in early trading. This suggests that investors do not anticipate a significant policy shift as a result of a change in leadership.
Lagarde’s potential departure follows a similar move by Bank of France Governor François Villeroy de Galhau, who announced earlier this month that he would step down in June, more than a year before his term expires. This decision also allows Macron to appoint his replacement before the upcoming presidential election. While Villeroy de Galhau cited a desire to join a charity as his reason for leaving, observers suggest Macron orchestrated the move to gain control over the appointment process.
The selection of Lagarde’s successor will ultimately rest with all 21 leaders of the Eurozone, but historical precedent indicates that the backing of both France and Germany is crucial for any candidate to succeed. Several names have emerged as potential contenders, including former Dutch central bank chief Klaas Knot, Bank for International Settlements General Manager Pablo Hernández de Cos, and Bundesbank chief Joachim Nagel. Isabel Schnabel, a current member of the ECB’s executive board, has also expressed interest in the position, though her eligibility may be limited by rules preventing board members from seeking non-renewable terms.
Despite the speculation, the timing of Lagarde’s departure remains uncertain. Her arrival at the ECB in November 2019 coincided with a period of relative economic stability, and she is now presiding over a period of low inflation, neutral interest rates, and sustainable economic growth – a scenario some economists have described as a “central banker’s nirvana.”
Given the consensus-based decision-making process within the ECB, a change in leadership is not expected to dramatically alter monetary policy. Markets currently anticipate that the ECB will maintain its current interest rate stance for the remainder of the year, although global economic uncertainties could prompt a reassessment.
Lagarde’s current term is scheduled to conclude on October 31, 2027. Before leading the ECB, she served as the managing director of the International Monetary Fund from 2011 to 2019 and previously held the position of French finance minister.
