TD n. 618 2014

Carlos Viana de Carvalho, Fernanda Feitosa Nechio.

We combine questions from the Michigan Survey about future inflation, unemployment, and
interest rates to investigate whether households are aware of the basic features of U.S. monetary
policy. Our findings provide evidence that some households form their expectations in a way
that is consistent with a Taylor (1993)-type rule. We also document a large degree of variation in
the pattern of responses over the business cycle. In particular, the negative relationship between
unemployment and interest rates that is apparent in the data only shows up in households´
answers during periods of labor market weakness.