US inflation falls to 2.1%, almost hitting Federal Reserve target

A closely watched measure of US inflation has slipped to its lowest level since 2021, within striking distance of policymakers’ target, after the Federal Reserve scrambled to bring down price growth from its highest level in a generation.

The personal consumption expenditures (PCE) price index rose at an annual rate of 2.1% last month, down from 2.2% in August and in line with economists’ expectations.

The progress was underlined by official data released five days before the US presidential election.

The state of the world’s largest economy – and the cost of living in it – has played a central role in the contest between Kamala Harris and Donald Trump to succeed Joe Biden.

Inflation surged three years ago, peaking at its highest level in four decades as the impact of Covid-19 continued to roil the global economy.

Officials at the Fed, having initially insisted that an acceleration in price growth would be “transitory”, later engineered an extraordinary U-turn and embarked upon an aggressive campaign to tackle it. The Fed would go on to lift interest rates to a two-decade high – and only started to cut them last month.

The central bank’s effort was designed to bring inflation down to its target of 2%.

The so-called “core” PCE index – which strips out volatile food and energy costs – rose 2.7% in September, in line with recent months, but slightly above economists’ expectations of 2.6%.

While inflation has fallen dramatically, years of price increases continue to take their toll on many Americans. The economy has remained remarkably resilient – and continued to grow at a robust pace in the third quarter, according to data released on Wednesday – but almost half of voters wrongly believe the US is in recession, according to a Harris Poll conducted exclusively for the Guardian last month.

Such polling frustrated Biden. When the president withdrew from the election this summer, making way for Harris, his vice-president was more willing to acknowledge that the cost of living remained “just too high” for many.

As Trump has argued that America is in economic decline, the White House has sought to underline positive economic figures in recent months. Hiring unexpectedly accelerated in September, and data for October will be released on Friday.