For several months now, states around the world have been confronted with inflation. This is becoming more and more concrete for the population when buying everyday needs, but what is the impact for savers?

The first concrete consequence, the rate of regulated savings accounts

Since the beginning of 2022, we have seen an unprecedented increase in the rates of regulated savings books. The best known of them, the Livret A, went to 1% on 1 February 2022 before being revalued to 2% on 1 August 2022 and reaching 3% on 1 February 2023. This is a rate not seen since 2008! The Livret Développement Durable et Solidaire (LDDS) has undergone the same changes.

The Livret Épargne Populaire (LEP), which is accessible on a means-tested basis, rose from 2.2% to 6.1% over the same period.

These rates may seem attractive, but with inflation running high, reaching 5.2% in France in 2022, the net return on savings is negative.

The consequences of central bank decisions

In order to curb this inflation, the central banks, the European Central Bank (ECB) and the Federal Reserve Bank of the United States (FED) in particular, are raising their key rates. This has two major effects. Firstly, it affects the interest rates on bank loans (see usury rate issues) and therefore the OAT (Obligations Assimilables du Trésor) market. This increase in bond yields makes this market more attractive since all new bonds issued generate higher coupons. The second effect is that it encourages savings and leads to a slowdown in consumption. This decrease in demand lowers prices and therefore slows down inflation.

However, caution is needed as the bond market remains uncertain and there are other fundamental criteria than yield.

What about equities?

The attractiveness of bonds mentioned above is redirecting some investment. Indeed, the risk/return ratio of bonds is such during these periods that investors seek these supports. As equities are "abandoned" during these phases and knowing that this generates sometimes massive sales, we are witnessing a general decline in the market.

Consequently, equities can gain in attractiveness and this represents opportunities to be seized.

The choice of an investment medium, an investment or the management of allocations is complex, all the more so in such turbulent times as today.

It is therefore essential to be advised by a trustworthy professional. Wealth A7, a wealth management firm for over 15 years, can accompany and advise you, contact us!

In a world that is on the move, Wealth A7 is there to bring your wishes to life.