The inflation gauge closely watched by the Fed fell to its lowest level since early 2021.

WASHINGTON (AP) — As a presidential race largely shaped by Americans’ frustration with high prices draws to a close, the government said Thursday that a measure of inflation closely watched by the Federal Reserve has fallen to near pre-pandemic levels.

The Commerce Department said prices rose just 2.1% in September from a year earlier, down from a 2.3% rise in August. That’s barely above the Fed’s 2% inflation target and in line with 2018 levels, long before prices began rising in the wake of the pandemic recession.

On a monthly basis, prices rose 0.2% from August to September, up slightly from the 0.1% rise from July to August.

However, some signs of inflationary pressure remained. Excluding volatile food and energy prices, so-called core prices rose 2.7% in September from a year earlier, unchanged from August. On a monthly basis, core prices rose 0.3% from August to September, compared with just 0.1% from July to August.

The hike in the benchmark rate is higher than the Fed would like, and if it remains persistently high, it could cause the central bank to slow the pace of rate cuts in the coming months.

However, core inflation has eased to 2.3% year on year over the past six months, down from 2.5% in August. Economists expect the Fed to cut its key rate by a quarter point at its meeting next week.

Overall, the latest signs of a steady cooling in inflation come five days before an election in which many voters are unhappy with the economy, mainly because average prices remain nearly 20% higher than four years ago. Former President Donald Trump largely blamed the Biden-Harris administration’s energy policies and promised that inflation would “decrease.” disappear completely “if he is elected. Vice President Kamala Harris has vowed to ban food price gouging and cut child care and health care costs.

Economists say Trump’s policies will actually worsen inflationmainly due to his plans to impose radical new tariffs and begin mass deportations of migrants and other immigrants. Harris’ price-gouging proposals won’t have a short-term effect, experts say.

Inflation peaked at 7.1% in June 2022 after the economy accelerated from a pandemic recession during a period of severe shortages of parts and labor, according to a measure released Thursday called the personal consumption expenditure price index. Inflation has fallen steadily over the past two years as supply chains recovered from disruptions caused by the pandemic and the Federal Reserve raised its key interest rate to a four-decade high, dragging down home sales and auto purchases.

The Fed tends to favor the inflation index the government released Thursday, the Personal Consumption Expenditures Price Index, a better-known index. consumer price index. The PCE index attempts to account for changes in how people shop during a surge in inflation. For example, it can record when consumers switch from more expensive national brands to cheaper stores.

In general, the PCE index tends to show a lower inflation rate than the CPI. That’s partly because rents, which have been high, are weighted twice as much in the consumer price index as they were in the index released Friday.

Chairman Jerome Powell signaled at the end of August that the Fed is increasingly confident that inflation is under control. Hiring weakened in July and August. These trends have caused the Fed reduce the key rate last month up half a point. As inflation continues to slow, the Fed is expected to cut rates further by a quarter point in November and likely another quarter point in December.

However, the prospects for future rate cuts are not entirely clear. Hiring surged in September and the unemployment rate fell to a low 4.1%, suggesting the labor market may be stronger than it appeared last summer. Retail sales also grew in a healthy clip last month. And on Wednesday the government estimated that the economy had grown at a strong pace. 2.8% annual rate in the July-September quarter there was a strong pace, supported by strong consumer spending.

Upbeat economic data has prompted some speculation that the Fed could decide to skip a rate cut in December or cut rates more slowly next year.

On Friday, the government will release the last major economic data ahead of the presidential election: the October jobs report. This will probably provide more confusing picture than usual in the labor market because Hurricanes Helen and Milton are believed to have caused tens of thousands of workers to lose their jobs, at least temporarily.