Govt. Rejects Bank Of France Proposal To Cut Livret A Savings Rate To 1%

(RTTNews) - France's finance minister has rejected the central bank's proposal to reduce the interest rate on a popular savings account to 1 percent, despite low inflation.

The Bank of France on Wednesday said that the interest rate on the Livret A savings account must be cut to 1 percent from 1.25 percent. The proposal must be approved by the Finance Ministry.

Elsewhere, Finance Minister Pierre Moscovici said the government will not follow the central bank's proposal to reduce the rate, citing concern over the purchasing power of the public, and will leave it unchanged at 1.25 percent. He spoke on the French radio channels Radio Classique and LCI.

The central bank noted that a strict application of the calculation formula, which is largely based on inflation, would have resulted in a rate of 0.75 percent. However, the bank said it refrained from such a strict application to preserve the purchasing power of savers in the backdrop of VAT hikes at the start of the year.

A 1 percent interest rate is aimed at supporting growth and employment by lowering the cost of financing for the economy, the bank said.

The Bank of France calculates the rate twice a year, on 15th of January and July. The Livret A is a popular savings account with more than 60 million account holders.

On an annual average basis, France's inflation based on the consumer price index decreased to 0.9 percent last year from 2.0 percent in 2012. Excluding tobacco prices, inflation slowed to 0.7 percent from 1.9 percent in 2012.