‘I cannot remain neutral’: Lagarde finally explains her early ECB exit

Christine Lagarde is leaving the European Central Bank (ECB) early because she no longer wants to stay silent. The ECB president, who will step down on 7 February 2027, around nine months before her term ends, said on Thursday that the neutrality expected of central bankers, which she described as "the price of their independence," was no longer something she could accept. “I don’t think that I can remain neutral,” she told reporters in Frankfurt.

“I’m interested in the truth, and I see the truth being very often damaged, contradicted by misrepresentation,” she added. It was not the only surprise of the afternoon. Moments after the ECB left its key interest rates unchanged, with the deposit rate at 2.

5%, Lagarde revealed that policymakers had seriously debated raising them instead. The decision to hold was unanimous, she said. But her message to markets was that the pause may only last until December.

Why did the ECB come close to a hike? Two things have changed since the ECB’s last forecasts in September, Lagarde explained. The first is energy.

Petrol, diesel and gas prices have kept climbing, and refining margins remain high. Eurozone inflation rose to 3. 8% in September, with energy prices up 18.

9% from a year earlier. The second is the cost of long-term borrowing. Lagarde said the average 10-year government bond yield in the eurozone had risen by around 35 basis points since the cut-off date for the September projections.

That rise matters because it does part of the central bank’s job for it. When governments and companies pay more to borrow over ten years, mortgages and business loans get more expensive too, and spending slows. Mortgage rates already climbed to 3.

8% in August from 3. 5% in July, while banks tightened lending standards for companies in the third quarter. “If you combine these two factors, actually, the Governing Council debated whether a hike was appropriate,” Lagarde said.

In the end, the council judged it was “well positioned enough at this stage to hold”, and that a “measured approach” remained appropriate. Is a December hike now on the cards? Lagarde repeated the ECB’s usual line that it decides “meeting by meeting” and is not pre-committing to any path.