"It's essentially the soft landing that many of us dreamed of," said Gregory Daco, chief economist at EY, referring to a scenario in which high interest rates manage to tame inflation without causing a recession.
The Commerce Department reported that prices rose just 2.1% in September from a year earlier, down from a 2.3% rise in August, which is barely above the Fed's 2% inflation target.
Still, for the past six months, core inflation has declined to a 2.3% annual rate, down from 2.5% in August, which indicates a cooling of inflationary pressures.
Though faster wage growth provides a boost for workers, it can also fuel inflation if companies pass on their higher labor costs to consumers.
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