We address the interplay between household debt accumulation and monetary policy. Monetary policy likely affects household debt-to-income ratios via disposable income and inflation, not just by changing the financial incentive to save. We provide micro-level snapshots from Norway on how households’ income flows and debt accumulation co-move with interest rates and inflation. Real interest rate hikes are associated with increased real debt due to strong negative association between inflation and real debt. We therefore caution against pursuing contractionary policies to curb household debt. By lowering inflation, such policies might backfire and increase household debt burdens.