Effects of Monetary Policy on Household Expectations: The Role of Homeownership and Tenancy in USA

This paper investigates how monetary policy differentially affects household expectations based on homeownership status in the United States. While existing literature addresses the general transmission mechanisms of monetary policy, the heterogeneity in responses between homeowners and renters remains underexplored. Using microdata from the Michigan Consumer Survey (MSC) and the New York Federal Reserve’s Survey of Consumer Expectations (SCE), we analyze how interest rate changes influence expectations about inflation, labor market prospects, and financial decisions.Our findings reveal that homeowners exhibit stronger reactions to interest rate changes, primarily due to mortgage-related cost adjustments and housing wealth effects. Renters, by contrast, show more muted responses, with expectations largely shaped by employment conditions and rent inflation. By incorporating an econometric framework that accounts for ownership status and macro-financial variables, we offer new evidence on the distributional consequences of monetary policy. These insights underscore the importance of targeted central bank communication strategies that account for household heterogeneity in policy sensitivity.