Source: AP

WASHINGTON (AP) -- The post-pandemic spike in U.S. inflation eased further last month as year-over-year price increases reached a three-year low, clearing the way for the Federal Reserve to cut interest rates and likely shaping the economic debate in the final weeks of the presidential race.

Wednesday's report from the Labor Department showed that consumer prices rose 2.5% in August from a year earlier, down from 2.9% in July. It was the fifth straight annual drop and the smallest since February 2021. From July to August, prices rose just 0.2%.

Excluding volatile food and energy costs, so-called core prices rose 3.2% in August from a year ago, the same as in July. On a month-to-month basis, core prices rose 0.3%, a slight pickup from July's 0.2% increase. Economists closely watch core prices, which typically provide a better read of future inflation trends.

"Today's report will add to confidence within the Fed that inflation is indeed on a sustainable path towards 2%," the Fed's target level, Carl Weinberg, chief economist at High Frequency Economics, wrote in a note to clients.

Read more: https://apnews.com/article/inflation-prices-interest-rates-economy-federal-reserve-bb1f4cfeede550c6c82fd78e2ea537a5