European Central Bank President Christine Lagarde will step down from her role on Feb. 7 next year, nearly nine months before her term expires, she announced Thursday.

"It has been a source of great pride to serve this institution. I thank all of those who have supported me on this journey over the past seven years," Lagarde said.

Lagarde has led the central bank since July 2019, steering its policy responses to the Covid-19 pandemic, the Russia-Ukraine war and a series of energy price shocks that sent inflation in the 21-nation euro area above 11%. Her term was due to end in October 2027.

She was given a standing ovation by the Governing Council of the central bank on Thursday.

The announcement came ahead of the ECB's latest monetary policy decision, due later on Thursday, in which it is expected to hold interest rates despite inflation in the 21-nation euro zone hitting a three-year high in September.

European Council President Antonio Costa thanked Lagarde for her "dedication."

"She has provided a steady and determined stewardship, helping to safeguard stability and the resilience of the euro area," Costa said in a statement.

The process of appointing her successor will begin immediately, he added.

Lagarde, born in Paris in 1956, first worked as a high-ranking lawyer before joining the French government. In 2007, she became the first female Finance Minister of a G7 country. She was appointed managing director of the International Monetary Fund in 2011 before joining the ECB.

Lagarde is viewed as a top candidate to become the next chair of the World Economic Forum, according to Financial Times reporting. In recent media interviews, she has suggested she does not plan a run at the French presidency in the 2027 election.

The ECB's leadership is now engaged in talks as the central bank looks to fill a number of senior roles, with chief economist Philip Lane and executive board member Isabel Schnabel also due to step down next year.

Former head of the Netherlands central bank, Klaas Knot, and former head of Spain's central bank, Pablo Hernández de Cos, are widely regarded as top contenders to replace Lagarde.

"Both are excellent candidates," ING's global head of macro Carsten Brzeski told CNBC by email on Thursday.

"Nationality will also matter. While Knot might find more support among Northern European governments, the question is whether De Cos will be supported by the current Spanish government."

"In any case, both would bring a high level of monetary policy expertise to the table. Something that Christine Lagarde had to pick up on when already in office."

Berenberg Chief Economist Holger Schmieding said that as well as the usual issues of monetary policy competence and regional balance, the ECB would need to consider who could deal with potential financial turbulence amid widening spreads in bond yields between member states.

Market participants are debating whether the ECB could be forced to use one of its intervention mechanisms as France faces a mounting sovereign debt crisis, with further uncertainty ahead due to next year's election.

"As a former chair of the G20's Financial Stability Board (FSB), Knot may have an edge in this respect," Schmieding said in a note.

"The European Union is trying to guard itself at least somewhat against the risk that right-wing Marine Le Pen may win the French presidential election in April/May 2027."

"However, the ECB has no mandate and no appetite to fund French fiscal follies. In our view, the ECB would only support France if Paris returns to more sustainable policies," he said.