Christine Lagarde, Welcome to the ECB

The ECB held its monthly policy meeting earlier on Thursday, and for investors who were scanning the highlights, there were no significant changes. The bank kept its main refinancing operation rate at zero and maintained its bond purchase program at 20 billion euros each month. However, there was a new face at the follow-up press conference, the first for Christine Lagarde as president of the powerful ECB.

Lagarde will certainly have big shoes to fill, as she takes over for Mario Draghi, who headed the ECB for eight years, from 2011 until 2019. Draghi was considered an outstanding economist and leader, so much so that Paul Krugman, a prominent U.S. economist, called Draghi “arguably the greatest central banker of modern times”. With Draghi at the helm, the currency markets would on occasion show little movement after an ECB rate decision, only to react sharply after follow-up comments from Draghi at his press conferences.

Lagarde is not an economist (she is a politician and lawyer), but she has plenty of experience for her new role as one of the most powerful central bankers in the world. Lagarde was the French Finance Minister from 2007-2011, and in 2009, the Financial Times named her the best finance minister in the eurozone. Lagarde then moved to the International Monetary Fund (IMF), which she headed from 2011-2019. Under her leadership, the IMF was a key partner in providing emergency financial aid to Greece, but she did not always see eye-to-eye with European leaders over how best to restructure the Greek economy.

Will Lagarde follow in the path of Mario Draghi? Lagarde has stated that she plans to have her own style as head of the ECB, but she is expected to continue the accommodative monetary policy that was the hallmark of Draghi’s presidency. Still, we could see some changes at the ECB under Lagarde. She has stated that she will carry out a review of the bank’s monetary policy framework, and has suggested that the ECB could become involved in additional areas, such as the fight against climate change. When asked if she considered herself a dove or a hawk, Lagarde replied that she preferred to be considered an owl — “a very wise animal”.