I develop a heterogeneous-agent New-Keynesian model featuring racial inequality in income and wealth and study interactions between racial inequality and monetary policy. Black and Hispanic workers gain more from an accommodative monetary policy than White workers mainly due to higher labor market risks. Their gains are larger also because a larger proportion of them are hand-to-mouth, while wealthy White workers gain more from asset price appreciation. Monetary and fiscal policies are substitutes in providing insurance against cyclical labor market risks. Racial minorities gain even more from an accommodative monetary policy in the absence of income-dependent fiscal transfers.

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