WASHINGTON (AP) — Inflation in the United States fell last month to its lowest level on record surging more than three years ago, resulting in a flood of encouraging economic news in the final weeks of the presidential campaign.

Consumer prices rose just 2.4% year-on-year in September, compared to 2.5% in August, and the smallest annual increase since February 2021. Measured month-over-month, prices rose 0.2% from August to September The Ministry of Labor reported Thursday, the same as last month.

However, excluding fluctuating food and energy costs, “core prices,” a measure of underlying inflation, remained elevated in September, driven by rising costs for medical care, clothing, car insurance and airfares. Core prices rose 3.3% in September from a year earlier and 0.3% from August. Economists watch core prices closely because they typically provide a better indication of future inflation.

Alan Detmeister, an economist at UBS Investment Bank, suggested that some items that contributed to higher core inflation last month, particularly used cars, could rise again in the coming months, keeping prices somewhat elevated. But other items whose prices rose in September, such as clothing and airfares, are more volatile and are expected to cool soon.

“Things are still slowly declining, but there will be volatility from month to month,” said Detmeister, a former Federal Reserve economist.

Overall, the September numbers show inflation falling steadily back toward the Fed’s 2 percent target, albeit in an uneven pattern. That decline suggests the Fed is likely to cut its key interest rate further this year, with most economists expecting two quarter-point cuts in November and December.

On the bright side, apartment rental prices rose more slowly last month, a sign that housing inflation is finally cooling, a long-awaited development that would provide relief for many consumers.

Omair Sharif, founder of Inflation Insights, said new rental metrics show a steady slowdown, suggesting government rental indicators are likely to weaken further over time.

“I think we are on the right track here,” Sharif said. “We should see a significant cooling in rents.”

Headline inflation last month was held back by a sharp decline in gas prices, which fell 4.1% in August-September. Food prices rose 0.4% last month after rising slightly for about a year, although they are only 1.3% higher than a year earlier.

Still, food prices have risen nearly 25% from pre-pandemic levels, straining the budgets of many Americans and drawing significant attention in the presidential campaign. Trump has quoted this often Cost of Baconwhich rose 30% to a high of $7.60 per pound in October 2022, as an example of the sharp increase in the cost of living. Bacon prices have now fallen to $6.95 but are still high.

Food prices at restaurants rose 0.3% last month and 3.9% last year. And clothing prices rose 1.1% from August to September, 1.8% higher than a year ago.

Bryan Tublin, co-founder of Kitava, a casual farm-to-table restaurant in San Francisco, said he has struggled greatly with rising prices for produce, meats and oils over the past three years. Although some of those prices have started to fall, many farmers are still passing on their higher costs for things like transportation and labor, he said.

In response, Tublin said he switched suppliers in search of cheaper products and replaced the cauliflower rice with a local wild rice blend when cauliflower prices shot up.

Kitava has also started charging additional fees for beef and other proteins at its two locations.

“I see signs that our prices are leveling off and the increases are easing,” Tublin said. “There is a little bit of optimism … but it’s still very early.”

The improving inflation picture follows a Report on predominantly healthy workplaces The report released last week showed that hiring increased in September and the unemployment rate fell to 4.1% from 4.2%. The government has also reported that the economy was growing a solid annual rate of 3% in the April-June quarter. Growth is likely to have continued at roughly this pace in the just-completed July-September quarter.

Cooling inflation, robust hiring and healthy growth could erode former President Donald Trump’s economic lead in the presidential race, as measured by public opinion polls. In some polls, Vice President Kamala Harris even pulled with Trump on the question of who would best handle the economy after Trump decisively pushed President Joe Biden on the issue.

At the same time, most voters still rate the economy relatively poorly, largely due to the cumulative price increase over the past three years.

At the Fed, last week’s much stronger-than-expected jobs report raised some concerns that the economy may not cool enough to sufficiently curb inflation. The central bank cut its key interest rate by an oversized half point last month, the first rate cut of any size in four years. Fed policymakers also signaled they would consider two more quarter-point interest rate cuts in November and December.

In comments this week, a number of Fed officials said they were still willing to cut their key interest rate further, but at a deliberate pace, a signal that further half-a-percentage-point cuts were unlikely.

The Fed “should not cut its key interest rate in a rush, but rather do so gradually,” Lorie Logan, president of the Federal Reserve’s Dallas branch, said in a speech Wednesday.

Inflation in the United States and many countries in Europe and Latin America rose sharply as the economy recovered from the pandemic as COVID-19 shuttered factories and clogged supply chains. Russia’s invasion of Ukraine exacerbated energy and food shortages and drove up inflation. It reached its peak at 9.1% in the USA in June 2022.

Economists at Goldman Sachs predicted earlier this week that core inflation will fall to 3% by December 2024. And few analysts expect inflation to rise again unless conflicts in the Middle East worsen dramatically.

Although higher prices have upset the economy for many Americans, wages and incomes are now rising faster than costs and should make it easier for households to adjust. Last month, the The Census Bureau reported that inflation-adjusted median household income — the level at which half of households are above and half below — rose 4% in 2023, enough to bring incomes back to their pre-pandemic peak.

And on Thursday, the Social Security Administration announced that nearly 73 million recipients of Social Security and other benefits will do so receive a cost of living adjustment of 2.5% in January. That’s down from a 3.2% rise in 2024 and an outsized 8.7% increase last year, reflecting a rise in inflation that has now eased.