WASHINGTON (AP) — The Federal Reserve’s preferred inflation measure cooled last month, the latest sign that price pressures are waning in the face of high interest rates and moderating economic growth.

Thursday’s report from the Commerce Department said prices were unchanged from September to October, down from a 0.4% rise the previous month. Compared with a year ago, prices rose 3% in October, below the 3.4% annual rate in September. It was the lowest year-over-year inflation rate in more than 2 1/2 years.

Excluding volatile food and energy costs, increases in so-called core prices also slowed. They rose just 0.2% from September to October, down from a 0.3% increase the previous month. Compared with 12 months ago, core prices rose 3.5%, below the 3.7% year-over-year increase in September. Economists closely track core prices, which are thought to provide a good sign of inflation’s likely future path.

With inflation easing, the Fed is expected to keep its key benchmark rate unchanged when it next meets in two weeks. The latest figures also suggest that inflation will fall short of the Fed’s own projected levels for the final three months of 2023.

In September, the Fed’s policymakers predicted that inflation would average 3.3% in the October-December quarter. Prices are now on track to rise by less than that, raising the likelihood that Fed officials will see no need to further raise interest rates.

Since March 2022, the central bank has raised its key rate 11 times from near zero to roughly 5.4% in its drive to curb inflation. Most economists think the Fed’s next move will be to cut rates, with the first cut possibly occurring as early as late spring.

On Tuesday, Christopher Waller, a key Fed official, suggested that a rate cut is possible by spring if inflation continued to head lower. Waller sounded the most optimistic notes of any Fed official since the central bank launched its streak of rate hikes, and he signaled that the rate increases are likely over.

On Wednesday, the government reported that American consumers spent enough to help drive the economy to a brisk 5.2% annual pace from July through September. In Thursday’s report, the government said that consumer spending last month rose a modest 0.2%.

Most economists say growth is likely slowing sharply in the current October-December period from the cumulative effects of higher borrowing rates on consumer and business spending.

Inflation rocketed up during the pandemic as cooped-up Americans ramped up spending on furniture, appliances, and electronics just as global supply chains became snarled and unable to meet the accelerating demand for goods. Russia’s invasion of Ukraine also escalated food and energy costs.

Inflation, according to the Fed’s preferred gauge reported Thursday, peaked at 7.1% in June 2022. The central bank’s rate rate hikes have elevated the costs of mortgages, auto loans and other forms of consumer borrowing as well as business loans. The Fed’s goal in tightening credit has been to slow borrowing and spending cool the economy and tame inflation.

Even as inflation has cooled, overall prices remain much higher than they were before the pandemic erupted in February 2020, leaving many Americans with a gloomy outlook on the economy. Consumer prices are still about 19% higher than they were right before the pandemic struck. Most Americans’ wages have risen slightly more than that. But inflation-adjusted wages haven’t increased as quickly as they did before the pandemic.

Still, most economists say they are now confident that inflation will fall steadily to the Fed’s 2% target over the next year or so. Real-time data shows that the cost of new rents, one of the largest components of the government’s price indexes, have fallen steadily. Over time, those figures feed into the government’s measure and should contribute to lower reported inflation.

Some Fed officials are sounding more optimistic about where they think inflation is headed. In his remarks Tuesday, Waller said he was “increasingly confident” that the Fed’s interest rate policies are “well-positioned to slow the economy and get inflation back to 2%.”

The U.S. inflation gauge that was issued Thursday, called the personal consumption expenditures price index, is separate from the government’s better-known consumer price index. The government reported earlier this month that the CPI rose 3.2% in October from 12 months earlier.

The Fed prefers the PCE index in part because it accounts for changes in how people shop when inflation jumps — when, for example, consumers shift away from pricey national brands in favor of cheaper store brands.