ECB decision paves way for rate cut in February

The European Central Bank (ECB) announced on Thursday a new cut in interest rates, the second in three months.

Savers will soon have to give up on the 3% interest on the Livret A savings account. On Thursday, the European Central Bank announced its decision to lower its rates by a quarter of a point for the second time in three months. And this decision will have consequences for the French people’s favorite investment, whose rate was frozen at 3% until February 2025 by Bruno Le Maire instead of being revised as planned in its calculation formula applied twice a year, in February and in August.

Commercial banks hold cash in accounts at the ECB, remunerated according to the monetary institution’s deposit remuneration rate. They pass this interest on to their customers’ accounts. Savers were therefore the big winners of the rate increases carried out between 2022 and 2024. The remuneration of the Livret A, the most popular savings product in France, increased from 0.50% in 2022 to 3% currently. The drop in rates could therefore penalize them.

Inflation settles below 2%

In addition to the monetary policy decisions of the European Central Bank, the level of inflation also influences the Livret A rate: when it falls, as is currently the case, the remuneration of the savings product moves in the same direction. It therefore remains to be seen how much the downward revision of the Livret A rate will be next February.

While inflation is expected to remain below 2% until the end of the year according to INSEE and even reach 1.6% over one year in December, new ECB meetings are planned for October and December and could result in new reductions in key rates. So many factors that could therefore influence the next interest rate on the savings product.

In The Echoesthe director of the Cercle de l’épargne Philippe Crevel is betting on a range between 2.7 and 3%: “This will be an opportunity for the new government to boost consumption, a rate of 3% would also have a cost for the banks.” For his part, the director of economic studies at IESEG Eric Dior is betting on a more contained drop, around 2.9%, arguing that “Christine Lagarde warned that inflation could rise again at the end of 2024.” On August 1, the popular savings account had already lost one percentage point of yield, in the wake of the ECB’s first monetary easing, with a rate reduced from 5% to 4%.