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European Union member state leaders surprised pundits on Tuesday night by picking Lagarde, currently head of the International Monetary Fund (IMF), to succeed Mario Draghi at the ECB’s helm.
Bond yields fell and stock markets rose across Europe following the announcement.
Lagarde has led the Washington-based IMF since 2011 and was formerly French finance minister. Yet she has no direct experience of central banking and faced criticism in debt-burdened Mediterranean states for the IMF’s actions during the Eurozone crisis.
Andrea Iannelli, investment director at Fidelity International, said Lagarde has “played more political than policy-related roles in her career”.
Deutsche Bank research strategist Jim Reid said that “her relative inexperience” with the ECB’s complex policy toolkit meant “there is a credibility risk, especially if and when things get more complicated economically”.
However, Lagarde’s support for the unconventional policy measures such as bond buying pursued by Draghi, which are credited with saving the Eurozone after 2012, have reassured markets.
Seema Shah, chief strategist at Principal Global Investors, said the appointment had “come as a positive surprise to markets, dissipating fears that hawkish Bundesbank president Jens Weidmann would be taking the helm”. [...]
Related article on Project Syndicate