ECB keeps key rates unchanged at 2.5% as Christine Lagarde announces early exit

Rates held as energy costs rise

The European Central Bank kept its three key interest rates unchanged on Thursday, 29 October, with the deposit facility rate at 2.50%, the main refinancing operations rate at 2.65% and the marginal lending facility rate at 2.90%. The governing council said energy prices kept rising, which raises the risk of higher inflation and weaker growth. Underlying inflation has so far stayed broadly stable, and wages have not shown a substantial reaction at this stage. The bank also noted that the full effects of the energy crisis have not yet become visible. Financing conditions have tightened since the council's previous meeting, a development it expects to weigh on both inflation and growth.

Deposit facility rate2.5%

Main refinancing operations rate2.65%

Marginal lending facility rate2.9%

Deposit facility rate

2.5 %

Main refinancing operations rate

2.65 %

Marginal lending facility rate

2.9 %

Data from the article text

Policy path and market expectations

The council said it will set policy meeting by meeting, based on incoming economic and financial data, and it has not committed to any particular path for interest rates. It also said it can still manage the current heightened uncertainty while aiming to bring inflation back to its 2% target over the medium term. The hold was broadly expected, since almost all economists in a Bloomberg survey had forecast an unchanged deposit rate. The same survey showed those economists expecting the ECB to lift rates by 25 basis points by the end of the year. Analysts expect the third and final increase of 2026 to arrive in December, taking the deposit rate to 2.75%, when new inflation projections running to 2028 are due. The last increase came in September, and new data since then has been limited, a point economists cited as a reason to hold.

Lagarde's early departure

Christine Lagarde told the governing council and European Council President Antonio Costa that she will leave her post on 7 February 2027, eight months before her term ends. In a short video shared on social media, the 70-year-old said she was leaving with the sense that good work had been done and an ECB ready for the future. According to a source cited by Reuters, she resigned so that she could take positions on political issues in France and globally. Lagarde is a former French finance minister and former head of the International Monetary Fund. As ECB president she had to stay neutral to protect the independence of the institution, and her departure ends months of speculation about how long she would remain in the role.

Bond markets and the race to succeed her

French government bond markets are facing strong turbulence, while energy prices remain persistently high. Several economists have warned that the recent rise in government bond yields, especially in France, will hold back growth even as it helps limit inflation. Oil and natural gas prices have jumped because of the war in Iran, adding to supply disruptions that the ECB's new projections will have to account for. Lagarde's departure opens the way to one of the most important leadership changes in the bank's history. The race to succeed her has already begun, and the next full set of projections arrives in December, the same month analysts expect the final rate increase of the year.