In February 2025, the rates for Livret A and LDDS are expected to decrease by 0.5 points to 2.5%, following a government freeze at 3% until the end of January. This change is influenced by a significant drop in inflation, estimated at 1.2% for October 2024. Although the rates may decline, the real returns on these savings products will remain positive, a trend sustained since March 2024. The LEP’s future rate remains uncertain, potentially falling from 4% to 3%.
Livret A and LDDS Rates Expected to Drop by 0.5 Points in February 2025, LEP Rate Uncertain but Real Returns Remain Positive
The rates for the Livret A and the LDDS will be held at 3% until the end of January 2025, following a governmental decision made in 2023. Starting February 1, their interest rates will be adjusted, and unfortunately, the change will not be an increase.
Currently, inflation is decelerating significantly. It fell below 2% in August, and a preliminary estimate by INSEE published on October 31 indicates that inflation is at 1.2% for October 2024 compared to October 2023.
The average inflation for the last six months of 2024 is projected to be around 1.7%, potentially dropping beneath 1.5%. This will naturally impact the calculation of the future rate for the Livret A, as the semiannual inflation rate excluding tobacco is a key factor. It is noteworthy that the monthly inflation rate, excluding tobacco, reached 4.20% in July 2023, prompting the government to freeze the rates for the Livret A and LDDS for a period of 18 months.
Livret A Rate Cut by 0.5 Points
In light of this situation, Eric Lombard, the director-general of the Caisse des Dépôts (CDC), announced this Thursday that the Livret A rate is expected to drop from 3% to 2.5% on February 1. The decision is anticipated around January 15, 2025.
The Livret A’s rate calculation formula, which also applies to the Livret de Développement Durable et Solidaire (LDDS), is based equally on the price changes of the previous semester and on an interbank lending rate among European banks.
Known as €ster, this rate has been mechanically affected by three recent cuts in the European Central Bank’s (ECB) key interest rates on June 12, September 18, and October 17. Consequently, the semiannual average of €ster, currently at 3.75%, is expected to approach 3.50% by the year’s end, according to economist Philippe Crevel in his economic report.
Positive Real Returns
As a result, the “technical” rate for the Livret A, derived from its calculation formula, will likely hover around 2.50%. The Livret d’Épargne Populaire (LEP) will also be affected, but it is somewhat shielded by the Livret A.
The LEP rate is determined either by the inflation from the last six months or by the Livret A rate plus 0.5%. With falling inflation, the LEP rate may decrease from 4% to 3%. However, the government retains the option to deviate from the specified formula, as it has done multiple times in recent years, particularly regarding the LEP, according to Philippe Crevel.
Even though the rates for the Livret A, LDDS, and LEP are set to decline next year, the real yield on these regulated savings products will still remain positive after accounting for price increases, continuing the trend established since March 2024—a unique occurrence since 2009.