French government cuts rate on Livret A to 0.75%

The French government has trimmed the regulated rate on Livret A, tax-free savings accounts, to 0.75 % from 1%, following a recommendation from the Bank of France. The measure will be effective on 1st August.

It is the first time Livret A’s rate falls below 1%.

The Bank of France has based its recommendation on a formula linked to the latest inflation rate and money market rates. The central bank said that if the formula was strictly applied, the rate should have been cut to 0.5% since latest inflation data showed an annual rate of 0.3%.

“Given expectations for a slight increase in inflation by the end of the year and in order to protect savers’ purchasing power, the governor considers it is justified in not strictly applying the formula,” the central bank commented in a statement.

The French minister of Finance Michel Sapin stated that there was a double objective behind the rate’s trim : securing the saver purchasing power and favouring investment in social housing with earnings amounting to over €300m.

French savings accounts, Livret A and Livret de Développement Durable, have seen €2.62bn outflows during the five first months of 2015 including €630m outflows in May.

Over 61 million of Livret A accounts are currently opened in France.

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