Inflation reaches lowest point in 3 years; here's what prices came down most

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FILE-People shop at a grocery store on August 14, 2024 in Rosemead, California. (Photo by FREDERIC J. BROWN/AFP via Getty Images)

Inflation fell in September to its lowest point since it began soaring over three years ago.

Consumer prices increased 2.4% last month from a year earlier, down from 2.5% in August, and the smallest annual rise since February 2021. Prices also increased 0.2% from August to September, the same as in the previous month, the Labor Department reported on Thursday.

According to the Associated Press, "core" prices, which measures underlying inflation, remained high in September, driven up by rising costs for medical care, clothing, auto insurance and airline fares.

September data reflect that inflation is moving back to the Federal Reserve’s 2% target, with the agency projected to continue cutting its benchmark interest rate this year, the AP noted.

What prices came down the most?

Inflation was held down by a decline in gas prices, which fell 4.1% from August to September.

Grocery prices spiked 0.4% in September, after a year of mild increases, though they are only 1.3% higher than a year earlier.

Food prices also inflated almost 25% from pre-pandemic levels. The AP noted that Donald Trump has often cited the cost of bacon, which jumped 30% to a peak of $7.60 a pound in October 2022, as an example of increases in the cost of living. Bacon prices have since dropped to $6.95.

Restaurant food prices rose 0.3% in September and are up 3.9% in the past year. And clothing prices rose 1.1% from August to September and increased 1.8% from a year ago.

In September, core prices were up 3.3% from a year earlier and 0.3% from August. The AP noted that economists closely watch core prices, which typically provide a better hint of future inflation.

The Census Bureau reported last month that inflation-adjusted median household incomes — the level at which half of households are above and half below — increased 4% in 2023, enough to return incomes to their pre-pandemic peak.

Moreover, the Social Security Administration announced on Thursday that almost 73 million recipients of Social Security and other benefits will receive a 2.5% cost of living adjustment in January. This is down from a 3.2% increase in 2024 and an 8.7% spike in 2023, emphasizing an inflation increase that has since declined.