Livret A, LEP… Good and bad news to come for your savings rates

Will the February 1 increase in the rate for Livret A and other regulated savings accounts be followed by others in 2023? The conditions are met for the Livret A and the LDDS, not for the LEP. But everything will depend on the choices of the public authorities. Explanations.

3% for the Livret A and the LDDS, 2% for the Housing savings account and 6.10% for the LEP, all net of taxes: it had been a long time since the regulated savings accounts had yielded so much . And it may not be over. According to the regulatory calendar of Livret A and its satellites, an upcoming update is possible in less than 6 monthsAugust 1 to be precise.

However, this is not automatic. Everything will depend on the evolution, between now and the end of the semester, of the two benchmarks used to calculate the returns on regulated savings: inflation and the ster, an interbank rate calculated by the European Central Bank (ECB). But also of the will of the Governor of the Banque de France, who can choose not to take these indices into account and to propose another rate, or a status quo, the approval of the Minister of Economy and Finance.

Are the rates of the Livret A and the others likely to increase again on August 1st? Here is what we can say today.

Livret A, LDDS, CEL: a new increase is possible

From 6% currently to 5% in mid-2023: this is the inflation trajectory traced by INSEE in its economic report released yesterday, Tuesday 7 February. According to the statistical institute, the rise in prices has therefore finally reached a plateau, after 2 years of rises, and will begin to ebb, under the effect of the fall in the prices of petroleum products. Result: barring a new shock, linked in particular to the course of the war in Ukraine, the average price increase in the first half of 2023 should be a little lower than in the second half of 20225.5% against 6.1%.

What influence on the future rate of the Livret A? It is in fact this half-yearly average which will be taken into account in its calculation formula. Its decline does not mean that the remuneration of regulated savings will fall. Because the other index, the ster, remains strongly on the rise. Its half-yearly average has started, since the end of July 2022, a steep rise. At the end of 2022, it reached 0.537%. A full month later, it has already exceeded 1% (1.01% on February 6).

This trajectory should continue. The ster, indeed, is influenced by changes in key interest rates of the European Central Bank (ECB). Since the turn of the institution’s monetary policy to fight against inflation, at the end of July 2022, the rate of the deposit facility has been raised 5 times, from -0.50% to 2.5%. And it’s not over: a new increase of half a point has already been announced for the next ECB meeting on March 16.

It is therefore the ster which should be the driving force for another rate hike of savings settlement in August. At this rate, its half-year average could well exceed 2% at the end of June, and bring the Livret A and LDDS rates to the 4% mark.

The political-economic unknown

In addition to inflation and the ECB’s monetary policy choices, another unknown factor will influence the future Livret A rate: the politico-economic choices of the public authorities. As we have seen, the Governor of the Banque de France can overrule the automatic application of the calculation formula. This is what he has just done, by slowing down the rise in the Livret A rate, which should have reached 3.30% on 1 February. A decision notably justified, in a press release dated January 15, by the need to smooth the evolution of the Livret A rate, both upwards and downwards.

If this guideline were maintained, the increase on August 1 could, for example, be limit half a point, i.e. 3.5% for the Livret A and the LDDS, and 2.50% for the CEL.

LEP: get ready for a rate cut

Finally, what about the People’s Savings Booklet? The evolution of its rate currently responds to a different logic from that of other regulated savings accounts. It escapes, in fact, politico-economic considerations. To fulfill the poster promise, that of neutralize the effects of rising prices on savings middle- and low-income households, the public authorities allow the LEP rate to closely follow the evolution of inflation. This is what enabled it to be successively upgraded to 2% on February 1, 2022, 4.6% on August 1, 2022 and 6.10% today.

Logically, the LEP rate will still be aligned in August with the average inflation for the 1st half of 2023. Or 5.5%, if INSEE’s forecasts prove to be correct.

Bad news, the LEP rate has reached a ceiling and will soon drop

A revaluation on May 1? Unlikely.

In addition to the automatic updates on February 1 and August 1, the return on regulated savings accounts may also change, exceptionally, on May 1 and October 1. On what condition? If the Banque de France considers that the variation in inflation or the money markets justifies it, explains the judgment framing the method of calculation of the Livret A and its satellites (1).

This lever, however, has never been activated by the institution and it seems unlikely that this will be the case this year.

(1) Order of January 27, 2021 relating to interest rates for regulated savings products

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