How far could the Livret A rate finally fall at the start of 2025?

While we recently imagined an inflation rate close to 2% until the end of the year, the slowdown in price increases has further accelerated in France, with a return to an annual rate of only +1.2% in September (provisional results from INSEE). These figures shake up the outlook for price developments for the end of the year and modify the forecasts of remuneration rates for regulated savings accounts, the calculation formula of which depends closely on inflation over the last six months.

The remuneration rate of the Livret A and by extension that of the Sustainable and Solidarity Development Booklet (LDDS) will not change until the end of January 2025 and the end of the exceptional blocking period at 3%, decided by the former government a little over a year ago. But in four months, from February 1, 2025, the rate of the French favorite booklet should again be calculated according to its dedicated formula which depends on both inflation levels and European interbank rates.

Volatility of the barrel of oil

The current sharp drop in inflation is mainly explained by the decline in petroleum products, but it is today very difficult to plan ahead with the military escalation observed in the Middle East which has just caused the barrel of crude oil to jump. In the absence of a strong and lasting rise in energy prices between now and December, the average inflation excluding tobacco for the second half of 2024 could ultimately fall to around 1.5% but it is also possible that we will between 1.6% and 1.7%.

Inflation under control makes it possible to accelerate the reduction in key rates

As for interbank rates, we are today at 3.42% for the €STR but the sharp drop in inflation which is also confirmed throughout the euro zone authorizes the European Central Bank to accelerate its pace reduction in key rates. With the now high probability of witnessing a further reduction in key rates of 25 basis points on October 18 with a possible gesture of the same magnitude in December, the half-yearly average of the €STR could finally slide to around 3.40% according to our calculations.

The Livret A rate could drop to 2.4%

Therefore, the arithmetic average of the two components of the calculation formula would, according to our estimates, lean towards 2.4% or 2.5%. Compared to 3% today, we must now expect a clear drop in the Livret A and LDDS rate on February 1, 2025. Especially since we still see little reason why the new government interferes since this landing remains consistent with the fall in inflation by continuing to offer correct remuneration for risk-free support.

Consequences for the LEP rate

A Livret A falling to 2.4% or 2.5% would however have consequences on the rate of the Popular Savings Booklet (LEP) which cannot be lower than what the theoretical calculation formula for the Livret rate will give. Increased by half a point. In other words, the LEP rate could fall from 4% today to 2.9% or 3% at the start of 2025 (2.4% +0.5% or 2.5% +0.5%). But to cushion this decline and continue to protect the savings of low-income households from inflation, the Barnier government could intervene and temporarily place the cursor at 3.5%.