TY  - RPRT
        AU  - Grigoli, Francesco
AU  - Sandri, Damiano
AU  - Gorodnichenko, Yuriy
AU  - Coibion, Olivier
        TI  - Monetary Policy According to Households: Perceptions, Reactions, and Channels
        PY  - 2026/Apr/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 18591
        UR  - https://www.iza.org/publications/dp18591
        AB  - This paper studies how households perceive the transmission of monetary policy and how these perceptions affect their decisions. Using a large-scale survey of over 25,000 U.S. households combined with randomized information treatments, we measure how households expect changes in the federal funds rate to affect economic conditions and their own behavior. Households report that higher interest rates lead them to reduce their spending, particularly on durable goods. However, the mechanisms underlying this response differ markedly from those in standard macroeconomic models. Respondents expect monetary tightening to raise borrowing costs and inflation. In turn, consumption function estimates identified using information treatments reveal that households respond to higher expected inflation by reducing consumption. Household inflation expectations also emerge as a central driver of portfolio reallocations following monetary policy changes.
        KW  - monetary policy transmission
KW  - household expectations
KW  - inflation expectations
KW  - consumption
KW  - portfolio choice
KW  - survey evidence
        ER  -