U.S. consumer prices increased in July at a slower-than-expected annual rate, raising the likelihood that the Federal Reserve will begin to cut interest rates at its next scheduled meeting in September.

The Labor Department’s consumer price index (CPI) rose by about 2.9% last month, slowing slightly from 3.0% in June. Economists had estimated that the figure would most likely match June’s rate.

On a month-on-month basis, the reading increased by 0.2% after falling by 0.1% in the previous month, matching estimates.

Excluding more volatile items such as food and gasoline, the core CPI rose by 3.2% in the twelve months to July, below estimates of 3.3%. On a monthly basis, core price growth increased by 0.2% after rising by 0.1% in June.

This release followed the cooler-than-expected July producer price index, which serves to confirm potentially benign inflation pressures that could give the Fed a chance to cut its interest rate from the 5.25%-5.50% range it has maintained for more than a year.

Fed Chairman Jerome Powell has stressed that positive inflation data is vital for a rate cut in September.

In addition, the non-farm payrolls report earlier this month indicated that U.S. employment growth slowed more than expected in July, while the unemployment rate increased to 4.3%, which could increase fears that the labor market is deteriorating, making the economy highly vulnerable to a recession.