Inflation gauge closely watched by the Fed falls to lowest level in 3 1/2 years

WASHINGTON — As a presidential race profoundly shaped by Americans’ frustration with high prices nears its end, the government said Thursday that an inflation gauge closely watched by the Federal Reserve has dropped to near pre-pandemic levels.

The Commerce Department reported that prices rose just 2.1% in September from 12 months earlier, down from a 2.3% year-over-year rise in August. That is barely above the Fed’s 2% inflation target and is in line with readings in 2018, well before prices began surging after the pandemic recession.

On a monthly basis, prices inched up 0.2% from August to September, up slightly from a 0.1% increase from July to August.

Taken as a whole, the latest signs of a sustained cooling of inflation arrive five days before an election in which many voters have soured on the economy, mostly because average prices remain nearly 20% higher than they were four years ago. Former President Donald Trump has largely blamed the Biden-Harris administration’s energy policies and promised that inflation would “ vanish completely ” if he is elected. Vice President Kamala Harris has promised to ban price gouging for groceries and to reduce child care and health care costs.