WASHINGTON — Inflation in the United States dropped last month to its lowest point since it first began surging more than three years ago, adding to a spate of encouraging economic news in the closing weeks of the presidential race.

Consumer prices rose just 2.4 percent in September from a year earlier, down from 2.5 percent in August and the smallest annual rise since February 2021. 

Measured from month to month, prices increased 0.2 percent between August and September, the Labor Department reported Thursday, the same as in the previous month.

Yet excluding volatile food and energy costs, “core” prices, a gauge of underlying inflation, were elevated in September, driven higher by rising costs for medical care and car insurance. 

Core prices in September were up 3.3 percent from a year earlier and 0.3 percent from August. Economists closely watch core prices, which typically provide a better hint of future inflation.

The improving inflation picture follows a mostly healthy jobs report released last week, which showed that hiring accelerated in September and that the unemployment rate dropped to 4.1 percent from 4.2 percent. 

The government has also reported that the economy expanded at a solid 3 percent annual rate in the April-June quarter. Growth likely continued at roughly that pace in the just-completed July-September quarter.

Cooling inflation, solid hiring and healthy growth could erode President Trump’s advantage on the economy in the presidential campaign as measured by public opinion polls. 

In some surveys, Vice President Harris has pulled even with Trump on the issue of who would best handle the economy, after Trump had decisively led President Biden on the issue.

At the same time, most voters still give the economy relatively poor marks, mostly because of the cumulative rise in prices over the past three years.

For the Fed, last week’s much-stronger-than-expected jobs report fueled some concern that the economy might not be cooling enough to slow inflation sufficiently. 

The central bank reduced its key rate by an outsized half-point last month, its first rate cut of any size in four years. The Fed’s policymakers also signaled that they envisioned two additional quarter-point rate cuts in November and December.

In remarks this week, several Fed officials have said they’re still willing to keep cutting their key rate but at a deliberate pace, a signal that any further half-point cuts are unlikely.

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

Inflation in America peaked at 9.1 percent in June 2022.

Economists at Goldman Sachs project that core inflation will drop to 3 percent by December 2024. Few analysts expect inflation to surge again unless conflicts in the Middle East worsen dramatically.

Associated Press