A key inflation indicator recorded its lowest reading in three years, a result that could make the case easier for the Federal Reserve, which is expected to cut interest rates at its highly anticipated September meeting.

The consumer price index rose 2.9% in July from a year earlier, the smallest year-over-year increase since March 2021, the Labor Department said Wednesday. The mark eased slightly from a 3% uptick in June and was slightly below economists' expectations.

“Inflation is calmer, thereby setting the Fed Reserve up to start the rate-cutting process in September,” National Association of Realtors Chief Economist Lawrence Yun said in a statement.

“Generally, the rate-cutting cycle is not one-and-done,” he added. “Six to eight rounds of rate cuts all through 2025 look likely. Whoever sits in the White House in 2025 will see lower interest rates.”

Federal Reserve Chair Jerome Powell presented a case in which a rate cut would be appropriate at a July press conference: inflation moving down quickly in line with expectations, growth remaining strong and the labor market staying consistent with its current condition.

After a weak July jobs report that briefly sent markets spiraling, conditions appear to be ripe for the Fed to cut rates. The national unemployment rate has gradually ticked up and hit 4.3% in July, the highest mark since October 2021.

President Joe Biden celebrated the cooling inflation data in a statement Wednesday, acknowledging the government still has work to do to lower costs but that it is making “real progress.”

“Today’s report shows that we continue to make progress fighting inflation and lowering costs for American households,” Biden said in the statement.

The increase in the CPI was almost completely driven by an uptick in housing costs. The shelter index, which tracks those costs, accounted for 90% of the monthly increase, rising 0.4%. In June, it went up by 0.2%

The personal consumption expenditures price index, the Fed's preferred inflation gauge, rose 2.5% year-over-year in June, continuing a steady downward trend, although it remains above the Fed's goal of 2%.

The July reading for the PCE data is scheduled for a release later this month by the Commerce Department. Fed officials will have that report and a second CPI reading for the month of August before their Sept. 17-18 meeting.