April 27, 2026, Filed Under: UncategorizedMonetary Policy According to Households: Perceptions, Reactions, and Channels EMPCT Working Paper Series No. 2026-0460 pages | PDF Download | PDF in Browser Citation:Grigoli, Francesco, Damiano Sandri, Yuriy Gorodnichenko, and Olivier Coibion, “Monetary Policy According to Households: Perceptions, Reactions, and Channels”, April 2026 Francesco GrigoliGeorgetown University Yuriy GorodnichenkoUC Berkeley, NBER and CEPR Damiano SandriBIS and CEPR Olivier CoibionUT Austin, NBER and CEPR AbstractThis 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.
