Citizens' money 2024: Fighting inflation with new standard rates - what that means for financial experts.

Citizens' money 2024: Fighting inflation with new standard rates - what that means for financial experts.

According to a report by www.merkur.de,

The state is planning to increase the standard rates for citizens' money on January 1, 2024 in order to counteract high inflation. This affects around 5.5 million people in need nationwide, including 1.68 million who are unemployed. The standard rates for citizens' benefit should be increased by up to 61 euros as needed to compensate for the rising cost of living. This is a further increase since the introduction of citizens' money at the beginning of 2023, when the standard rates were already increased by 50 euros.

The planned increase in the standard rates for citizens' money may have several effects on the market and the financial sector. On the one hand, the higher payments to those in need could lead to an increase in consumption because they have more financial resources at their disposal. This could have a positive effect on the domestic economy. On the other hand, fears of inflation could also be increased, as the higher standard rates contribute to more money in circulation, which in turn could fuel price increases. This could lead to investors increasingly fleeing into inflation-protected investments such as raw materials or real estate.

The calculation of the standard rates for citizens' benefit is based on an income and consumer sample (EVS) that is carried out every five years. Since there are no results from a new sample yet, the Federal Statistical Office will provisionally update the standard requirements using a mixed index of price developments (70 percent) and net wage developments (30 percent).

It remains to be seen how the planned increase in standard rates will affect the market and the financial sector. Inflation developments and changes in consumer behavior in particular could play an important role in the coming months.