We suspected that inflation was still in danger of accelerating by this summer and the latest economic projections from INSEE confirm this scenario. In its latest economic update, the National Institute of Statistics estimates that the annual shift in the consumer price index will continue to increase, going from +4.8% in April to +5.2% in May then at +5.4% in June.
These forecasts are based in particular on the assumption of stable oil prices around their current levels, ie approximately $105 for a barrel of Brent. The INSEE economists also take into account the impact of increases in producer prices, which is now rapidly transmitted to consumer prices, whether for agricultural, industrial products or services.
Precautionary savings
This bad news for the purchasing power of the French still hides a probable partial compensation for the millions of holders of a Livret A and/or a Livret de développement durable et solidaire (LDDS) who share the same calculation formula rate of pay, largely indexed to inflation. Especially since the Livret A generally plays a role of safe haven where to place its precautionary savings in times of crisis or high inflation like today. At the ceiling, these two booklets make it possible to invest a secure and tax-free amount of practically €35,000, currently remunerated at 1%.
Theoretical rate
The calculation formula in force for the Livret A rate of return corresponds to the half-yearly average of the inflation rate for the last six months and the short-term interbank rates of the Euro zone, with a rounding calculated to the nearest tenth of a point. . The Banque de France calculates these rates January 15 and July 15th and submits its proposals to the government.
Determining the rate for the livret A thus remains an eminently political decision since the government has the option of derogating from this theoretical rate or adjusting it in one direction or the other. This is what happened last January when the government preferred to increase the remuneration of the Livret A to 1% (against 0.5% previously) while the calculation formula indicated 0.8%.
Average inflation close to 4.40%
We can already imagine the new theoretical rate which will be calculated in mid-July. Based on INSEE projections for the months of May and June, we arrive at an average inflation of close to 4.40% over 6 months. With short-term interbank rates around -0.58% in recent months, we arrive at a Livret A and LDDS rate of 1.9%. We can even imagine a new doubling of the rate (currently at 1%) if the government decides to round up to 2%…
A LEP at more than 4%
The popular savings account rate (LEP) is determined to cover average inflation. It therefore has a good chance of being increased to more than 4% this summer. However, the LEP remains subject to income ceilings and it is not possible to invest more than €7,700.