BRUSSELS—International Monetary Fund chief Christine Lagarde is likely to become the first woman to run the European Central Bank, putting an experienced crisis fighter in charge and paving the way for a continuation of easy-money policies.
Ms. Lagarde also would be the institution’s first president without a pedigree in central banking. That has raised doubts about whether she would command the same credibility in financial markets as current chief Mario Draghi, who emerged as a dominant figure in the global economy during his nearly eight years at the ECB.
Her nomination comes as central bankers face challenges on a number of fronts. Inflation has weakened below target in many developed economies including the eurozone, while trade conflicts have crimped economic growth. But central bank rates are already super low or—in the case of Europe and Japan—negative, which spurs lending by reducing borrowing costs and making it unattractive to hold deposits..
Meanwhile, some central bankers are in the crosshairs of politicians. President Trump has routinely bashed Federal Reserve Chairman Jerome Powell for raising interest rates. And last month, he set his sights on Mr. Draghi, complaining that the ECB’s rate-cut signals were devaluing the euro. Days later, he praised the ECB president.
The ECB operates under tremendous scrutiny in Europe because the 19-member eurozone doesn’t have a common finance ministry, making the bank the region’s dominant voice on economic and monetary affairs.
“Ms. Lagarde is likely to take an expansive approach to both conventional and unconventional monetary policies that could support growth in the eurozone,” said Eswar Prasad, a former IMF economist who is now a professor at Cornell University.
Ms. Lagarde, 63 years old, a former French finance minister, would be effective building consensus, he said, “but whether she can provide the sort of visionary and creative technocratic leadership that Draghi brought to the job remains to be seen.”
Mr. Draghi’s term ends on Oct. 31 and cannot be renewed. The selection of Ms. Lagarde emerged after three days of talks among member states on a slate of top jobs in the European Union. “Christine Lagarde will, with her international background and standing as current managing director of the International Monetary Fund, be a perfect president of the European Central Bank,” European Council President Donald Tusk said Tuesday at a news conference at the end of the negotiations.
Formal approval of Ms. Lagarde’s nomination, which requires a series of procedural moves, is likely to take place in the coming months.
On Twitter, Ms. Lagarde wrote that she was “honored to have been nominated” and that she was temporarily relinquishing her responsibilities as IMF chief.
EU leaders nominated German Defense Minister Ursula von der Leyen on Tuesday to become the first woman to be president of the European Commission, the bloc’s executive arm, succeeding Jean-Claude Juncker.
Ms. Lagarde became in 2011 the first woman to head the Washington-based IMF. She played an instrumental role in securing bailouts for ailing economies in Europe, especially Greece, following the 2008 financial crisis. Previously, she worked as an antitrust lawyer, becoming a partner and then the first female chairman of the Chicago-based law firm Baker McKenzie.
The choice of Ms. Lagarde will be a surprise to many. Although there have been no formal candidates for the ECB presidency, speculation in recent months has centered around German central bank head Jens Weidmann, French ECB members Benoît Coeuré and François Villeroy de Galhau and former Finnish central banker Erkki Liikanen.
Ms. Lagarde’s experience at the IMF gives her the star power—she has been on the cover of Time and featured in Vogue—along with the political savvy needed to deal with pressure from European governments for more stimulus.
But she lacks the monetary-policy experience of the other candidates as the central bank is weighing additional stimulus that could have some adverse side effects. The ECB’s first three presidents—Wim Duisenberg, Jean-Claude Trichet and Mr. Draghi—had all headed their national central banks before taking the helm of the ECB.
At the height of Europe’s debt crisis in 2012, Mr. Draghi’s pledge to do “whatever it takes” calmed financial markets and is credited with keeping the euro together. The comment came in a speech, not after an ECB policy meeting where colleagues would have weighed in on the statement.
“Under ordinary times, managing monetary policy is not very difficult,” said Stefan Gerlach, a former deputy governor of Ireland’s central bank. “The problem is when something completely unexpected happens, where there’s no points of reference. Her advisers will tend to disagree.”
Supporters said managing an IMF staff that includes hundreds of PhD economists, and having regular interactions with central bankers, more than offsets Ms. Lagarde’s lack of a formal economics or central-banking background.
Her candidacy could face hurdles.
In 2016, a French court found her guilty of committing negligence in 2008 when she was finance minister in the cabinet of former President Nicolas Sarkozy. The judge didn’t hand down a punishment, saying the ruling took into context the role Ms. Lagarde played in crafting France’s response to the global financial crisis. The IMF backed her, as did the French government.
ECB officials have recently flagged the possibility of interest-rate cuts to raise inflation toward the bank’s target of just under 2%, but with the ECB’s deposit rate already at minus 0.4%, such a move could damage banks that must pay to park funds with the central bank.
Restarting bond purchases could prove controversial in Germany, where many blame the ECB’s low interest-rate policies for wiping out the return on popular fixed-income saving products and for pushing up property prices as well as residential rents. The ECB is already sitting on €2.5 trillion ($2.8 trillion) in eurozone bonds after years of purchases.
Meanwhile, the three key architects of the ECB’s stimulus policies on bond programs, rate cuts and cheap, long-term loans to banks have left the bank or will soon. In addition to Mr. Draghi, Mr. Coeuré’s term expires at the end of the year, and former chief economist Peter Praet’s term ended a few weeks ago. That could trouble financial markets, especially since the ECB’s vice president, Luis de Guindos, is a former Spanish economy minister who also didn’t have central banking experience when he joined the ECB last year.
If the ECB does move forward with fresh easing steps, they likely would occur before the next president arrives in November, removing the pressure that Ms Lagarde might have faced to craft unorthodox moves from the get-go.
Leaders of the EU’s 28 countries also nominated Spain’s foreign minister Josep Borrell to become the bloc’s foreign-policy representative. Prime Minister Charles Michel of Belgium was elected president of the European Council, the grouping of national leaders who together steer the EU’s activities.
—Emre Peker, Joshua Zumbrun and Tom Fairless contributed to this article.
Write to Valentina Pop at valentina.pop@wsj.com and Brian Blackstone at brian.blackstone@wsj.com