Monday, 23 Apr 2018

Savings: ways to reform the Livret A rate calculation

In the future, the rate may vary by only ten basis points. The floor rate would be fixed in absolute value.

Once again, the formula for setting the Livret A interest rate will be reformed. The justification is the same as in the past: the government wants this calculation formula to really apply as often as possible. They hope to remove the political dimension of setting the rate of this savings product held by more than 55 million people.
The Livret A rate is already subject to very precise calculation rules, based on short rates (the Eonia) and the rate of inflation, and rounded to the nearest quarter of a point. The Bank of France traditionally determines it on January 15 and July 15 of each year, but the governor of the central bank or the finance minister may not apply the formula. So that approaching the fateful date the pressure rises on the tenant of Bercy, always reluctant to validate a measure as unpopular as the decline in the rate of this product acclaimed by the French.

In recent years, the formula has rarely been applied. First, because the very low rates and low inflation would have pulled investors’ earnings too hard, secondly because inflation has gone up again and moved away from market rates, anesthetized by the policy. monetary policy of the European Central Bank. However, if the executive wants to keep a fairly attractive rate for holders of Livret A, it does not intend to penalize social housing organizations with loans at too high rates.
It is in this context that the government decided, at the end of 2017, to freeze for two years (until the end of January 2020) the Livret A pass, at a historically low rate of 0.75%, to offer housing organizations social attractive financing conditions in exchange for lowering their rents. And this, to allow the state to reduce the personalized help to housing. Broad consensus Since,…

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