The interest rate on Livret A passbook savings accounts will be lowered to 2.4% on February 1, from the current 3%, the French Ministry of the Economy and Finance announced on Wednesday.

The interest rate on the Livret d'épargne populaire (LEP), a savings account for low-income households, will fall from 4% to 3.5%.

The government is thus following the recommendations made earlier today by the Banque de France.

After reaching an all-time low of 0.5% in 2020, the interest rate on the Livret A, whose calculation formula is based on the rate of inflation, gradually climbed to 3% last year.

The future rate of 2.4% for the Livret A reflects the "reflux of inflation and refinancing rates", but remains "clearly higher than inflation", argued Banque de France Governor François Villeroy de Galhau at a hearing before the Senate Finance Committee on Wednesday.

For the LEP, the 3.5% rate is "significantly above the mechanical formula of 2.9%", he added.

(Written by Kate Entringer and Blandine Hénault, edited by Augustin Turpin)