LIVE MARKETS-Au revoir, Mme Lagarde

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AU REVOIR, MME LAGARDE

After over seven years at the helm, Christine Lagarde is stepping down as president of the European Central Bank in February, eight months before the scheduled end of her term.

An early resignation was expected, but jostling for the top job is now expected to ramp up.

The two apparent frontrunners are Klaas Knot, the former Dutch central bank head, and Pablo Hernandez de Cos, Spain's previous central bank chief. Knot was typically one of the more hawkish policymakers on the ECB, while Hernandez de Cos was seen as more of a pragmatist.

The resignation comes as inflationary pressures build due to the Iran war and as political uncertainties in the euro zone ramp up, with a Spanish election later this year, parliamentary elections in Greece and Italy next year, and the all-important French presidential election also in 2027.

"In addition to the usual issues of monetary policy competence and regional balance on the board, the question of who may be best placed to deal with potential financial turbulences will likely play a key role in the choice of new ECB leaders," said Holger Schmieding, chief economist at Berenberg.

"As a former chair of the G20’s Financial Stability Board (FSB), Knot may have an edge in this respect."

For now, Schmieding believes Lagarde's early resignation does not change the outlook for ECB policies.

The central bank is seen holding its deposit rate steady today, although markets are fully pricing in three more quarter-point rate increases by the end of next year.

Note: Annotations show the average core CPI and CPI rate under each term.

(Samuel Indyk)

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