Starting August 1st, the Livret A interest rate will decrease, affecting all regulated savings accounts, including the LEP. Recent inflation figures show a rise of 0.8%, the lowest since February 2021. The Livret A is projected to drop from 2.4% to 1.7%, while the LEP rate may yield 2.20%. However, adjustments could lead to a rounded Livret A rate of 2%, increasing the LEP to 2.5%, which could have political implications due to low current usage among eligible households.
Upcoming Changes to Livret A and LEP Rates
The confirmation is in: starting August 1st, the Livret A interest rate will see a decline. This adjustment will also impact all regulated savings accounts, including the LDDS, LEP, youth savings account, and CEL. The extent of this reduction is still to be determined. Recent figures from Insee indicate that consumer prices in France rose by 0.8% in March compared to the previous year, matching February’s rate. Notably, this is the first time since February 2021 that the monthly price increase has dipped below 1%.
While this may be a positive development for your purchasing power—especially after an inflation peak of 6.3% in January 2023—it poses challenges for savings growth. Inflation serves as one of the key components in the biannual assessment of the Livret A rate. By mid-July, the Bank of France will calculate the August 1st rate based on the “semi-annual average” of monthly inflation indices from Insee, excluding tobacco. Given that Insee’s inflation forecasts extend through June, it is anticipated that this average will hover around 1%.
Projected Interest Rates
Additionally, it is essential to take into account the semi-annual average of short-term euro rates (Euribor), which closely reflects the European Central Bank’s rate trends. A reduction of 0.25 points in this rate is likely by summer, with the semi-annual average of the Euribor estimated to be around 2.5% in July.
Consequently, the technical Livret A rate for August is projected to drop from 2.4% to 1.7%. For the popular savings account (LEP), the calculation involves the Livret A rate plus 0.5 points or the inflation rate. With inflation estimated at 1%, the LEP would yield a rate of 1.70% + 0.50 points, resulting in a total of 2.20%.
Possible Scenarios for Rate Adjustments
However, theory and practice can differ significantly. If the authorities decide to modify the Livret A rate calculation formula—something that occurs occasionally—they might opt for a rounded figure of 2% for the Livret A. In this scenario, the LEP rate would increase by 0.5 points over the Livret A, resulting in a 2.5% rate, down from the current 3.5%.
It’s important to note that a reduction in the LEP rate poses political risks, as the Bank of France aims to encourage eligible households to take advantage of this account. Out of the 19.5 million French citizens who qualify for the LEP, approximately 8 million are not currently utilizing it. In this context, a decrease in the LEP rate to around 3% appears to be a plausible compromise.