ECB Holds Rates Steady as Lagarde Announces Early Departure in February

Christine Lagarde announced she will step down as president of the European Central Bank in February, about nine months before her term ends. She said she can no longer accept the neutrality expected of central bankers, which she described as the price of their independence.

The ECB kept its main interest rates unchanged on Thursday. The deposit rate remains at 2.50 percent, the main refinancing operations rate at 2.65 percent, and the marginal lending facility rate at 2.90 percent.

Lagarde said policymakers had seriously discussed raising rates but decided unanimously to hold them steady. She added that the pause might last only until December, when the ECB is likely to develop new scenarios.

Energy prices and long-term borrowing costs were the main reasons behind the debate. Eurozone inflation rose to 3.8 percent in September, with energy prices up 18.9 percent from a year earlier, while the average yield on ten-year eurozone government bonds increased by about 35 basis points since the September projections.

Lagarde said wage growth is expected to be between 2.5 and 2.8 percent for the remaining months of 2026. She also said most long-term inflation expectations remain close to 2 percent and that there are no signs of second-round effects beyond projections.

She warned that risks to inflation are on the upside and that early stages of the price chain point to upward pressure. Lagarde added that the subsequent decline in energy inflation should reduce overall inflation.