The booklet A pass rate for the first time under the symbolic threshold of 1% on 1 August and will be set at 0.75%, a new level reflecting the current low inflation. This decision – expected – was announced Monday by the Ministry of Finance, which followed a recommendation of the Bank of France. “The goal [of the lower rate, Ed] is twofold: ensuring the purchasing power of investors and promote investment in the social housing sector with a gain of more than EUR 300 million,” said Bercy in a statement.
In theory, the remuneration of the savings product most widespread in France, created in 1818, has even had to lower to 0.50% if the formula for its calculation had been met . But as he has the opportunity, the Governor of the Bank of France, Christian Noyer, chose to derogate and to propose a more limited withdrawal. The rate formula uses the level of inflation (excluding tobacco), increased by 0.25 points. Yet in June the consumer prices rose year on year by 0.3%, according to data released last week by INSEE, thus giving 0.50% since we must round up quarter point the nearest one.
The decline in earnings is expected to promote growth and the construction of social housing. Indeed, a lower rate notably enables the Caisse des Dépôts (CDC), which centralizes 65% of Livret A savings, to grant cheaper loans, housing agencies for example. In the last two revisions of the remuneration of the Livret A, which occurs on 1 February and 1 August, the government had resisted to fall below the threshold of 1%, while the Bank of France had proposed each time to bring it back 0.75%. The persistence of low inflation will therefore have this time because of his opposition to the decision that will affect more than 61 million booklets A opened in France, making it eminently political. However, the effect on household finances will be marginal. Considering a booklet A type, whose average outstanding reached EUR 4,092 end 2014, the lower rate from 1% to 0.75% will represent a loss of 10.23 euros in a full year.
More withdrawals than deposits
The transition to below 1% was little doubt this time, the calls for a reduction in the rate being multiplied in recent weeks . Starting with the Governor of the Bank of France himself, who had assured early July he was “out of the question that the rate did not decline over the year”, while the rate of the Central Bank European – the one at which banks borrow it – is 0.05%. Before him, the Director General of the CDC, Pierre-René Lemas, and French bankers had also called for lower rates to help finance the economy. Conversely, the association CLCV consumers wished to maintain a 1% rate, in particular to protect the savings of low-income persons.
As for investors, the risk is now see further turn away from the Livret A, because even 1% remuneration struggled to attract. Over the first five months of 2015, they have made more withdrawals than deposits on their Livret A, leading to net outflows of € 2.32 billion in late May. And since April 2014, savings product had more deposits than withdrawals every month with the exception of a transient improvement in March. The lower rate will also affect sustainable development booklet, also reduced from 1% to 0.75%, and the popular savings account, reserved for low-income households, which will increase to 1.25%.
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