US inflation falls to 2% as Fed cuts rates November 2024

The Federal Reserve cut its policy rate by 0.25 percentage point on November 7, citing inflation that has fallen from a peak above 9 % to “close to 2 %” while the labor market remains strong [1].

Inflation trajectory and policy response

The November 7 decision marked the first rate reduction since the Fed’s hikes pushed the benchmark above 5 % earlier in the year. The central bank highlighted that consumer price growth has slipped to roughly 2 % year‑over‑year, a dramatic decline from the 9 %+ levels seen in 2022‑23, and that disposable personal income now exceeds inflation pressures [1]. Despite the cut, bond yields have risen as investors price in the possibility of higher inflation ahead, reflecting “anticipation of higher inflation” mentioned in the commentary [1].

Market reaction and economic backdrop

Equity markets have kept climbing, setting new record highs after the policy move, while the bond market has moved in the opposite direction, with yields edging up on the expectation that future price pressures could re‑emerge [1]. The broader economy shows solid growth—GDP expanded 3 % in Q3 and 2.8 % year‑to‑date, driven by productivity gains and strong employment—yet consumer sentiment remains mixed, with a Wall Street Journal poll indicating 62 % of respondents view the economy as “not so good or poor” [1].

Fiscal and political context

The commentary notes that the Fed’s independence is unlikely to be challenged by the incoming administration, which has pledged to retain Jerome Powell through his term ending May 2026 [1]. Meanwhile, fiscal dynamics such as the national debt—rising from $19.9 trillion in 2017 to about $33 trillion under the current administration—remain a backdrop to the monetary stance, though no direct link to the rate cut is asserted.

What to watch

• Core CPI and PCE data: Upcoming releases will test whether the 2 % inflation figure holds, especially the “super‑core” services measure that rose to 3.7 % YoY in October [1].
• Fed’s next policy meeting: Scheduled for early 2025, the minutes will reveal whether the November cut is viewed as a one‑off adjustment or the start of a more accommodative stance.
• Bond market yields: Levels above 4 % on the 10‑year Treasury could signal renewed inflation concerns and pressure the equity rally.

The Fed’s rate cut underscores how quickly inflation can retreat from double‑digit peaks, but the divergent market moves and lingering fiscal challenges leave the durability of the recovery open to further data.