Livret A rate calculation process

The interest rate for the Livret A, a popular savings account in France, is revised twice a year, on February 1 and August 1. The process involves the Bank of France applying a specific formula, after which its governor recommends a rate to the Minister of Economy. The minister then decides whether to follow the formula or adjust it based on "exceptional circumstances."

Livret A rate formula

The Livret A rate is calculated as the average of two figures: the six-month average of the €STR, a key European interest rate, and the six-month average of inflation excluding tobacco, measured annually. The result is rounded to the nearest tenth, with a minimum rate of 0.50%.

Recent inflation data

The National Institute of Statistics and Economic Studies (INSEE) reported higher-than-expected inflation for September, revising its estimate upward. This suggests that price increases, particularly in energy, have been more significant than previously thought. INSEE now expects the six-month average inflation rate to reach 2.55%, up from 2.40% in June, with projections nearing 2.70%.

ECB's rate decisions

The European Central Bank (ECB) has raised its key interest rates in response to high inflation across the euro area. Its deposit facility rate, a key benchmark, has increased from 2% to 2.25% in June and then to 2.50% in September. A third increase is expected, likely in mid-December, with the €STR, a short-term interest rate, projected to reach 2.40% by year-end.

Expected Livret A rate

Based on current estimates, the legal rate for the Livret A is expected to be between 2.50% and 2.60%, likely closer to 2.50%. This would be an increase from the current rate of 1.70%. The Popular Savings Account (LEP) rate is also expected to rise to 3%, maintaining a minimum 0.5 percentage point difference from the Livret A.

Uncertainties in the calculation

The calculation of the Livret A rate relies on provisional inflation projections and hypothetical €STR trends, making it somewhat uncertain. Additionally, the Bank of France governor may recommend adjustments based on "exceptional circumstances," though it is unclear if such an exemption will be used in early 2027.