U.S. inflation has hit its lowest level since early 2021, marking a cooling trend in three years of economic price pressures.

The Labor Department reported Thursday that consumer prices rose 2.4 percent in September compared to the same month last year, down slightly from 2.5 percent in August.

This marks the smallest annual increase since February 2021.

However, the underlying inflation measure, known as “core” inflation—which excludes volatile food and energy costs—increased 3.3 percent from a year earlier and 0.3 percent from August.

Rising costs for medical care, clothing, auto insurance, and airline fares contributed to this uptick.

Alan Detmeister, an economist at UBS Investment Bank, noted that some items driving higher core inflation, such as used cars, could continue to rise in the coming months.

“Things are still gradually coming down, but there is going to be volatility month to month,” said Detmeister, a former Federal Reserve economist.

September’s figures indicate that inflation is gradually moving closer to the Federal Reserve’s 2 percent target, albeit with some fluctuations.

This trend could influence the Fed’s approach to interest rates, with most economists anticipating two more quarter-point cuts in November and December.

The positive news extends to the housing market, where rental prices showed slower growth last month.

Omair Sharif, founder of Inflation Insights, says the findings could potentially offer relief to consumers struggling with housing costs.

“I think we’re on the right path here,” said Sharif. “We should see rent cool off quite a bit.”

Falling gas prices played a significant role in keeping overall inflation low, with a 4.1 percent drop from August to September.

Despite the recent slowdown, food prices have surged nearly 25 percent since the start of the pandemic.

Meanwhile, restaurant prices edged up 0.3 percent last month, showing a 3.9 percent rise over the past year.

The cooling inflation comes amid broader positive economic signs.

The latest jobs report showed hiring surged in September, with the unemployment rate falling from 4.2 percent to 4.1 percent.

Additionally, the economy grew at a solid 3 percent annual rate in the second quarter, with similar growth likely continuing through the third quarter.

These improvements could reshape the political landscape ahead of the presidential election.

Surveys indicate Vice President Kamala Harris has narrowed the gap with former President Donald Trump on economic matters, though the overall economic outlook remains mixed among voters.

Inflation surged in the aftermath of the pandemic, peaking at 9.1 percent in June 2022, due to disrupted supply chains and global events like Russia’s invasion of Ukraine.

The Federal Reserve remains cautious.

Last week’s robust jobs report raised concerns about whether the economy is cooling enough to sustain lower inflation.

The Fed “should not rush to reduce” its benchmark rate “but rather should proceed gradually,” Lorie Logan president of the Federal Reserve’s Dallas branch, said in a speech this week.

Economists at Goldman Sachs project that core inflation will drop to 3 percent by the end of 2024, assuming no major new disruptions arise.

This article includes reporting from The Associated Press.