The French government has trimmed the regulated rate on the Livret A tax-free savings accounts, to 0.75 % from 1%, following a recommendation from the Bank of France, reports Investment Europe.
The measure will be effective on August 1st and is the first time the Livret A’s rate has fallen below 1%.
The Bank of France has based its recommendation on a formula linked to the latest inflation rate and money market rates. The central bank said that if the formula was strictly applied, the rate should have been cut to 0.5% since latest inflation data showed an annual rate of 0.3%.
“Given expectations for a slight increase in inflation by the end of the year and in order to protect savers’ purchasing power, the governor considers it is justified in not strictly applying the formula,” the central bank commented in a statement.
The French Minister of Finance Michel Sapin stated that there was a double objective behind the rate’s trim : securing the saver purchasing power and favouring investment in social housing with earnings amounting to over 300 million euros.