The economy’s response to monetary policy depends on its fiscal backing. We present a novel decomposition of the equilibrium that links the wealth effect, i.e. the revaluation of households’ financial and human wealth, to the fiscal response to monetary policy. When mon- etary policy has fiscal consequences, monetary variables affect the timing of aggregate output while fiscal variables determine its present value and the wealth effect. Consequently, a con- tractionary monetary policy reduces inflation only if followed by contractionary fiscal policy. The slope of the Phillips curve determines the importance of monetary-fiscal coordination for the effectiveness of monetary policy.