The distribution of individual inflation expectations displays complex and time-varying shapes. Does this matter for the efficacy of monetary policy? Using an extended version of the smooth transition VAR framework that achieves identification via external instruments and sign restrictions, we investigate how changes in the tails of the distribution of inflation expectations – which we call fear of inflation and deflation – affect the transmission of monetary policy shocks. We show that the responses of macroeconomic variables to monetary policy shocks in times of more prominent fears of inflation or deflation are different in a statistically significant way, both with respect to “normal times” and between each other. We also provide evidence of important asymmetries in the way the distribution of inflation expectations changes in response to a monetary policy shock, which could help explain the different responses of the macro variables.