ECB holds deposit rate at 2.5%; Lagarde says she will step down as president on 7 February 2027

The European Central Bank (ECB) left its three key interest rates unchanged on Thursday 29 October, keeping the deposit facility rate at 2.50%, the main refinancing rate at 2.65% and the marginal lending rate at 2.90%. The ECB raised rates by a quarter point in both June and September, according to CNBC.

Euro area inflation was 3.8% in September, its highest since September 2023, with energy prices up 18.8%, CNBC reported. The Governing Council said rising energy prices posed upside risks to inflation and downside risks to growth, and that financing conditions had tightened since its last meeting.

At the press conference, President Christine Lagarde said the Council had “debated whether a hike was appropriate” but decided unanimously that it was “well positioned enough at this stage to hold”. She said the ECB was “not seeing second round effects” beyond those in its September projections. After the decision, money markets priced about a 67% chance of a rise in December, according to LSEG data cited by CNBC.

Earlier on Thursday the ECB said Lagarde had informed the Governing Council and European Council President António Costa that she will step down on 7 February 2027. Her term was due to end in October 2027. Her successor will be appointed by the European Council. “I want to have the freedom of speech, the freedom of expression and the freedom to engage on matters that are not monetary policy matters,” Lagarde said, according to The Guardian.

French President Emmanuel Macron said the succession should be prepared in “an orderly and balanced way” with European partners, The Guardian reported.

See also: Lagarde on the bond sell-off and euro zone inflation.