Lagarde: May resign early as President of the European Central Bank to join French politics

President of the European Central Bank, Christine Lagarde, said she does not rule out the possibility of ending her current term early to participate in French politics.

According to Bloomberg, when asked by Les Echos whether she would consider leaving early if macro uncertainties subside, Lagarde replied: “That is a possibility.” She stated:

“I believe a European voice is needed in discussions about the French presidential election.”

In the same Les Echos interview, Lagarde reiterated her previous position:

“Since we're entering another period of turbulence, I think the captain of the ECB ship should stay at their post.”

Lagarde has long been seen as an important potential figure in French politics. However, she has previously described the position of President of France as “a dreadful job.”

Lagarde's current term as ECB President will end in October 2027. She told Les Echos that in the coming months, “I certainly might” engage in candid conversations with some French presidential candidates. She said:

“If the debate ultimately presents a more narrow view of France’s role in Europe, I believe it is necessary to explain why that would be a path that would cost our country and all French people.”

Lagarde believes last month's ECB rate hike was the correct decision

Lagarde also said in the interview that the ECB’s decision to raise interest rates last month was correct.

She stated: “We are confident that we made the right decision. As early as April, the vast majority of the Governing Council was ready to take action, but at that time we did not yet have all the necessary information.”

This June, after the war in Iran broke out, the ECB became the first central bank in the G7 to raise interest rates. The ECB said at the time that the shock was spreading throughout the economy, and the central bank could not tolerate inflation getting out of control, hence the rate hike.

However, since then, the U.S. and Iran have reached a peace agreement, driving international oil prices sharply lower and eliminating the main factor pushing up inflation. The latest data released on Wednesday shows that inflation in the eurozone slowed more than expected by the market.

Nonetheless, Lagarde believes that supply shocks are still spreading to other sectors of the economy, but so-called “second-round effects” have not yet appeared.

She remarked: “We are facing an external supply shock, which is spreading to other parts of the economy and we are now starting to see its indirect effects. Meanwhile, we are highly alert to the risk of second-round effects, although so far this has not happened.”

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