Consumer prices in the US rose at the slowest pace in more than three years last month, despite upticks in housing, food and car insurance costs.

Overall, prices rose 2.9% over the 12 months to July, the smallest annual increase since March 2021 and down from 3% in June, the Labor Department said.

The monthly inflation report was being closely watched after signs of weaker-than-expected jobs growth in July sparked stock market turmoil and recession fears earlier this month.

Analysts said the latest figures provided enough evidence that price increases are cooling to keep the US central bank on track to cut interest rates at its meeting next month, as expected.

The Federal Reserve has held its key lending rate at 5.3% – a roughly two-decade high – since July 2023, a move that has hit the public in the form of higher rates for mortgages, credit cards and other loans.

By keeping rates high, the bank is hoping to discourage borrowing and cool the demand pressures that were helping drive up prices of rents, cars and other items.

But the central bank is under pressure to cut rates as inflation, which tracks the pace of price increases, has started to move closer to its 2% target rate, helped by lower oil prices and resolution of Covid-era supply chain crunches.