Template-Type: ReDIF-Paper 1.0
Author-Name: Francesco Grigoli
Author-X-Name-First: Francesco
Author-X-Name-Last: Grigoli
Author-Name: Damiano Sandri
Author-X-Name-First: Damiano
Author-X-Name-Last: Sandri
Author-Name: Yuriy Gorodnichenko
Author-X-Name-First: Yuriy
Author-X-Name-Last: Gorodnichenko
Author-Name: Olivier Goibion
Author-X-Name-First: Olivier
Author-X-Name-Last: Goibion
Title: Monetary policy according to households: perceptions, reactions and channels
Abstract: 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.
Creation-Date: 2026-06
File-URL: https://www.bis.org/publ/work1354.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1354.htm
File-Format: text/html
Number: 1354
Keywords: monetary policy transmission, household expectations, inflation expectations, consumption, portfolio choice, survey evidence
Classification-JEL: E3, E4, E5
Handle: RePEc:bis:biswps:1354