French savers will soon have to face a significant reduction in the returns on their regulated savings accounts. The Livret A rate, currently stuck at 3%, could lose up to a percentage point during its next review in February 2025. This perspective, far from being a surprise for financial experts, arises directly from the latest economic indicators and European monetary decisions.
Free-falling inflation is a game-changer
The French economic situation is experiencing a major turning point with inflation falling more quickly than expected. The numbers speak for themselves: while inflation excluding tobacco still reached 4.20% in July 2023, it fell below 2% from August 2024. INSEE has just driven home the point by forecasting a rate of less than 1% for October 2024. This spectacular deceleration completely upsets initial projections, which predicted inflation of around 1.7% for the second half of the year. The latest estimates now point to a rate of 1.3%.
This dizzying fall in inflation is not without consequences for savers. The calculation of the Livret A rate is based in part on half-yearly inflation excluding tobacco. The freeze decided by Bercy in 2023, which artificially maintained the rate at 3%, will no longer be able to serve as a shield against this new economic reality. Experts now agree on an inevitable drop in the yield of this favorite investment of the French.
Interbank rates follow the downward trend
The €ster, this rate which reflects monetary exchanges between European banks, is also part of a downward trend. The European Central Bank has already made two successive cuts in its key rates, respectively on June 12 and September 18, 2024. A third cut is looming for the meeting of the Governing Council scheduled for October 17.
Philippe Crevel, recognized macroeconomist, anticipates in its economic letter a half-yearly average of the €ster close to 3.50% by the end of 2024, compared to 3.75% currently. This decline, combined with the slowdown in inflation, leaves little room for doubt as to the future direction of regulated savings rates.
Dismal outlook for savers
The technical calculations, based on the official formula, paint a discouraging picture. For the Livret A, by integrating inflation at 1.30% and a €ster at 3.50%, the technical rate would come out to 2.40%. The Ministry of the Economy nevertheless has room for maneuver. It could opt for a soft landing at 2.50% or, on the contrary, accentuate the decline to 2%.
The Popular Savings Account (LEP) will not escape this downward trend either. Its technical rate would be around 2.90%, far from the current 4%. Here again, Bercy retains decision-making latitude: maintain this technical rate, cushion the fall to 3%, or increase it to 2.50%.
- A significant drop in Livret A and LEP rates is looming for February 2025
- The Livret A rate could go from 3% to 2.40%, or even 2% depending on Bercy’s decisions
- LEP is expected to see its yield fall from 4% to around 2.90%
