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French increases the tax-free Livret A bank savings rate to 3% from 2%

Facade of the Bank of France "Banque de France" headquarters in Paris

PARIS (Reuters) -France's Livret A bank savings rate - held by millions of customers across the country - will be raised to 3% from 2%, Finance Minister Bruno Le Maire announced on Friday after the country's national central bank earlier suggested the move.

The rate, which determines the guaranteed and tax-free returns consumers obtain for placing a limited amount of money into a special account managed by their personal bank, will still be well below France's current headline inflation rate of 6.7%.

Top officials, including Le Maire, had recently flagged the move, citing the changing macro-economic environment and recent interest rate hikes by the European Central Bank.

The rate of another savings account, the so-called 'People's Savings Account' (Livret d'Epargne Populaire, LEP), will also be raised to 6.1% from 4.6%.

Contrary to the Livret A, access to that account is conditioned by people's yearly earnings that must be below a certain threshold.

France's statistics office earlier on Friday confirmed inflation in France fell to 6.7% in December from 7.1% in November.

Le Maire said his ministry expects the French inflation rate to decline to around 4% over the course of 2023.

"Yes the times are hard but we continue to protect the French people", he said.

(Reporting by Tassilo Hummel;Editing by Sudip Kar-Gupta)