The ECB pauses and Lagarde announces her exit

On Thursday 29 October 2026 the European Central Bank’s Governing Council left rates unchanged: the deposit facility at 2.50%, the main refinancing operations at 2.65% and the marginal lending facility at 2.90%. It is the first pause after two rises this year, in June and September, with which the ECB responded to the rise in energy prices linked to the war in Iran.

Hours earlier, the ECB itself had announced that Christine Lagarde will step down as president on 7 February 2027, some nine months before the end of her eight-year term. The day before, the US Federal Reserve had also held its rates.

Why it is pausing

Eurozone inflation rose to 3.8% in September, according to Eurostat’s flash estimate, almost double the 2% target. Energy, 18.8% more expensive than a year earlier, accounts for much of the rise; core inflation, which excludes energy and food, stayed at around 2.5%.

At the press conference, Lagarde explained that the Council had debated whether another rise was appropriate, that it considered itself well placed to hold rates and that the decision was unanimous. The statement warns that energy continues to push prices up and growth down, and that financing conditions have tightened since the previous meeting.

The ECB is not committing to any path and will decide meeting by meeting. Before the next one, in December, it will have two more inflation readings, third-quarter growth and wage data, and it will publish new projections. Much of the market expects one last rise in December, although the central bank has not announced it.

French debt

Part of that tightening comes from the sell-off in French government debt. The yield on the French ten-year bond rose above 5% last week, for the first time since 2002, and its spread over Germany is around 155 basis points. Lagarde avoided singling out France, spoke of a general rise in long-term yields and recalled that the ECB has instruments to respond if markets become disorderly.

Lagarde’s exit

Lagarde has led the ECB since November 2019. At the press conference she explained that she wants the freedom to speak on matters that are not monetary policy, and the press links her departure to the French presidential election in 2027. The European Council, which appoints the president by qualified majority, is now beginning the search for a successor; among the names mentioned are Spain’s Pablo Hernández de Cos, General Manager of the Bank for International Settlements, and the Netherlands’ Klaas Knot.

What it means for mortgages and companies

Today’s decision does not change instalments by itself. Variable-rate mortgages are reviewed against Euribor, which moves with what the market expects from the ECB: if a rise comes in December, much of it will already be priced into the index. For companies, the relevant point is that the ECB itself describes financing as more expensive than a month ago.

In a company, it helps to have at hand how much of the debt is at a variable rate, when it is reviewed and on what terms, and to take this into account when preparing the 2027 budget. This information is of a general nature.

A pause is not a change of course: December will show whether the cycle of rises is over.