The Fed is expected to begin gradually reducing interest rates after the latest inflation report showed a cooling trend in inflation and the inflation rate fell to its lowest level in the last three years.

Nick Timiraos, often referred to as the “Fed spokesman,” wrote in an op-ed Wednesday that the August Consumer Price Index (CPI) report could prompt the Fed to begin cutting interest rates at its meeting next week.

The CPI rose 2.5% annually in August, down from 2.9% in July, marking the fifth straight month of slowing inflation, according to the U.S. Labor Department. The core CPI, which excludes volatile food and energy prices, was steady at 3.2%, slightly below economists’ expectations, who had forecast a 2.6% increase in overall inflation and a 3.2% increase in core prices.

Following the report’s release, major U.S. stock indexes fell slightly, with the Dow leading the decline. U.S. Treasury yields rose slightly but remained near their lowest levels this year.

Housing inflation was strong in August, contributing to a stronger-than-expected pace of core inflation. That could complicate efforts to cut interest rates by a larger 50 basis points at the Fed’s next meeting, with traders now betting on a more moderate pace of easing. While many Fed officials have signaled they are ready to cut rates, some are still considering the possibility of a larger cut than the traditional 25 basis points.

The inflation report showed that food prices rose slowly in August, while used car and energy prices fell. The continued decline in oil prices points to more easing in the coming weeks that could ease Americans’ concerns about the economy.

Inflation has been a top issue for voters considering whether to support Vice President Kamala Harris or former President Donald Trump in the upcoming election. Rising energy, food and housing costs are a major weakness for Democrats, with voters consistently ranking them as top concerns.

*This is not investment advice.