The Livret A rate must be updated from 1 August. If his remuneration has been multiplied by 6 in just one year, from 0.5% to 3%, it should theoretically increase further next month. But it is not that simple. MoneyVox details the 3 possible scenarios.
The suspense is its height. In the next few days, the 55 million individuals who have a Livret A will know the future rate of the savings product preferred by the French.
Indeed, every six months, in mid-January and mid-July, the same ceremony takes place. The head of the Banque de France proposes to apply (or not) the mathematical formula determining the interest rate of the Livret A. If he decides to derogate, it is up to the Minister of Economy and Finance, Bruno Le Mayor today to set the new rate.
Here are the 3 possible scenarios on the Livret A rate which will apply from August 1st. A rate that has gone from 0.5% in 2022 to 3% since February 1, 2023.
Scenario 1: strict application of the formula
The Livret A rate is calculated on the basis of a mathematical formula. It takes into account the evolution of two indices, the average of theinflation excluding tobacco over the last six months and that of the ester, a reference rate which is used by banks for day-to-day money exchanges in the euro zone.
And we already know the figures on which the Governor of the Banque de France will rely to determine the new rate for the Livret A. The average price increase over the first six months of the year is 5.60% and that of ester 2.65%.
Result, on the basis of these two indicators, the theoretical rate of the Livret A, on August 1, stands at 4.10%. This is 1.1 points more than the current remuneration of the Livret, which has been 3% since February 1. This would therefore be excellent news for individuals who own one.
However, this scenario is unlikely to materialize. The governor of the Banque de France, Franois Villeroy de Galhau, has the possibility of slowing down, or even preventing, this rise. For this, he can absolutely invoke exceptional circumstances to override the rule for calculating the Livret A rate.
And he has been preparing minds for several weeks. On June 21, he again explained to the Echoes that the right balance will have to be found between the interest of savers and the interest of borrowers. The Livret A rate is one of the elements of the cost of real estate loans, in particular for social housing.
In this context, the economist Philippe Crevel also thinks that the formula for calculating the Livret A rate may not be followed. And this for many reasons. A one-point increase in the Livret A rate would generate a non-negligible additional cost for financial institutions (4 billion euros over one year), for social landlords as well as for local authorities or SMEs that borrow from the resources from the Livret A. The banks could be required to pass on the additional cost of the rate increase on the loans, details this expert.
Moreover, a high rate could also encourage the French to favor savings to the detriment of consumption which would harm growth. And it would further penalize other investments such as life insurance.
4%, it would peak in the rate hierarchy. A short-term savings product like the Livret A would thus be much better paid than long-term products, underlines the economist. Very bad news for life insuranceand in particular euro funds whose capital is guaranteed.
The latter, whose yield barely reached 2% last year, are suffering from the success of the Livret A. Savers withdraw more money than they pay into euro funds since the beginning of the year. Not sure that the authorities want to weaken the insurers.
Life insurance: a first month in the red since the start of 2023
Finally, as inflation is trending downwards, a significant increase could appear out of step with the coming trend. The government could be forced to make a significant drop in the rate of return within a few months, which would be unpopular, continues Philippe Crevel.
In summary, the scenario of a strict application of the formula has some lead in the wing.
Scenario 2: an increase halves
However, even if the Governor of the Banque de France does not apply the calculation formula, this does not mean that the Livret A rate will not increase on 1 August.
At the beginning of May, Bruno Le Maire was not hostile to the idea of a helping hand. My first responsibility is to protect French people’s savingsespecially in this period of crisis, it is extremely important… If ever the conclusion of the formula and the Governor of the Banque de France is that, as inflation is very high, we must continue to increase remuneration Booklet A, [alors] I will follow the recommendation of the governor, he explained on franceinfo.
For Philippe Crevel, the Minister of the Economy could thus retain a remuneration of the Livret A 3.5%a rate midway between that currently in force and that resulting from the application of the formula.
Scenario 3: the status quo
Many voices have been raised in recent weeks to demand an unchanged rate for the Livret A on August 1st. It is the will in particular of the banking sector, which distributes the Livret A and assumes part of the remuneration. But also from the Caisse des Dpts, which uses this resource, in particular, to finance HLM organizations.
As soon as this rate serves as the basis for the cost of financing social housing, and there are 170 billion euros borrowed by social housing, me, I form the view that this rate remains stable in the hardindicated Eric Lombard, the boss of the financial arm of the State, stressing that it is essential that social housing continues to be built.
Even the Minister of Housing, Olivier Klein, has made known his opposition to a new rise. Between these various contradictory interests, it will therefore be up to the Governor of the Banque de France, and to the Minister of the Economy, to decide on the future rate of the Livret A. One thing is certain: this decision will, whatever happens, controversial.
A situation that brings up the question: should the government be prevented from setting the rate for the Livret A to avoid reliving a new psychodrama every six months?
Livret A and LEP: should their ceilings be raised to 30,000 and 10,000 euros?