Prices rose as expected in August, while the annual inflation rate fell to its lowest level since February 2021, according to a Labor Department report released Wednesday that sets the stage for an expected quarter-percentage point interest rate cut by the U.S. Federal Reserve within a week.

The consumer price index, a comprehensive measure of the cost of goods and services in the U.S. economy, rose 0.2 percent during the month, in line with the Dow Jones consensus, the Bureau of Labor Statistics reported.

This brings the inflation rate over the last twelve months to 2.5%, 0.4 percentage points lower than in July, compared to the estimate of 2.6%.

However, the core CPI, which excludes volatile food and energy prices, rose 0.3 percent during the month, slightly above the 0.2 percent estimate. The core inflation rate for the next 12 months was 3.2 percent, in line with the forecast.

While the figures showed that inflation is slowly easing, housing-related costs remain a problem. The housing cost portion of the consumer price index, which makes up about a third of the index, rose 0.5 percent, accounting for most of the increase in the overall index. The housing cost index rose 5.2 percent year-on-year.

Food prices rose by only 0.1 percent, while energy costs fell by 0.8 percent.

Elsewhere in the report, used car prices are cut by 1%, medical services are reduced by 0.1% and clothing prices are increased by 0.3%.

Stock market futures fell after the report, but U.S. Treasury yields jumped.

In the Fed Funds Futures market, traders were pricing in an 85 percent probability that the Federal Open Market Committee will approve a quarter-percentage point, or 25 basis point, rate cut at its Sept. 18 meeting, according to CME Group’s FedWatch indicator.

This is breaking news, please check back later for updates..