Household Consumption Intentions by Income Group During Monetary Policy Easing and Tightening

ABSTRACT We investigate how the monetary policy interest rate affects Brazilian households' consumption intentions under two distinct regimes: monetary easing and tightening cycles. Using data from low‐ and high‐income households, we assess both the magnitude and the dynamics of this relationship. Overall, the evidence highlights two central findings. First, during the easing cycle, increases in the policy rate reduce households' consumption intentions, with a stronger effect among high‐income households. Second, during the tightening cycle, the relationship between the policy rate and consumption intentions becomes positive, and the divergence across income groups widens. We also document a temporal asymmetry: Under the easing cycle, the impact of a policy rate increase fades within 6 months, whereas during the tightening cycle, the effects of rate hikes persist for up to 12 months. These findings underscore the state‐dependent and income‐level dimensions of monetary transmission.