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This paper shows how Friedman gradually came to incorporate the expectations formation process in his account of macroeconomic disequilibria. It is shown that Friedman’s early monetarism relied on slowly adjusting prices and wages, mainly because of long-term contracts. When he first addressed the expectations issue in his work on macroeconomic dynamics, Friedman actually considered static expectations. In the mid-1960s, his anticipationist critique of the Phillips curve led Friedman to place at the center of the analysis the idea that private agents progressively adjust their forecasts to a new informational environment. Nevertheless, adaptive expectations involve backward-looking behavior regarding the price structure, without taking account of the probable effect of discretionary policy on the economy in the future; hence, economic agents make systematic forecasting errors. Friedman eventually considered forward-looking behavior in the 1970s, but stopped short of fully embracing the rational expectations approach to economic policy. In Friedman’s later monetarism there is an echo of his early joint work with Savage regarding attitudes toward risk based on the subjective probability approach. But this was the residual outcome of a very lengthy process.