Inflation continued to cool down in November, helping out household budgets that have been squeezed by steep price increases in recent years.

The Consumer Price Index, a widely-watched measure of the cost of living, rose 0.1% in November from October, after staying flat the month before, the Bureau of Labor Statistics said Tuesday. A drop of 6% in gas prices over the month canceled out increases in the costs of shelter, food, car insurance, medicine, and some other items. Over the 12 months through November, the CPI rose 3.1%, down from 3.2% in October and just over a third of the 9.1% annual increase in June 2022, which had been the highest since the early 1980s.

The report was the latest indication that inflation is on a downward trajectory while the labor market is staying relatively favorable to workers, raising the chances that the economy can come in for a “soft landing” from its recent bout of high inflation, rather than the economic crash many experts had predicted last year.

The report did show that some upward pressure on prices remains. “Core” inflation, a measure that excludes food and gas, rose 4% over the year, the same rate as in October, largely because of housing costs.

Stock futures ticked up immediately following the report before giving back those gains. The inflation numbers were in line with forecasts, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal.

Between March 2022 and July, the Federal Reserve raised its benchmark interest rate to a 22-year high and has kept it there, pushing up borrowing costs on all kinds of loans taken out by individuals and businesses, with the goal of discouraging spending and allowing supply and demand to rebalance. The Fed aims to lower inflation to an annual rate of 2% and keep it there. 

If that can be done without a recession, so much the better—a possibility that Fed officials have increasingly acknowledged in their public statements despite the historical record showing that’s extremely rare, with eight out of the last nine rate-hike campaigns resulting in an economic downturn.

The central bank is widely expected to keep its benchmark interest rate flat again when it announces its policy decision Wednesday, and the inflation report did nothing to change that view among financial market participants. The Fed has a 98.4% chance of holding its rate flat in its current range of 5.25% to 5.5%  according to the CME Group’s FedWatch tool, which forecasts Fed rate hikes based on fed funds futures trading data.

Wednesday’s meeting may also provide clues about when the Fed may decide that inflation is under control enough that it can begin cutting the fed funds rate, reducing the pressure that’s driven up interest rates on mortgages, car loans, and other credit.

Falling gas prices have contributed to inflation simmering down. As of Tuesday, a gallon of regular gas averaged $3.14 across the U.S., down almost 70 cents from August according to AAA. Prices for the crude oil from which gasoline is made have nosedived this autumn amid investor concerns that a slowdown in economic growth in countries outside the U.S. will lead to reduced demand.

Although inflation has lost much of its bite over the past year and a half, consumers are still dealing with prices for groceries, rent, and other essentials well above what they were before the pandemic hit. The economy has seen disinflation—meaning that prices aren’t rising so quickly—rather than deflation, which would mean prices for many things actually falling. The Fed is aiming for the former, and trying to avoid the latter, as Raphael Bostic, president of the Federal Reserve Bank of Atlanta, noted in a blog post late last month.

“Deflation might sound appealing. After all, who wouldn’t want to pay less for groceries next week?” he wrote. “But it can be economically destructive. Consumers may delay purchases because they expect prices will keep falling. That can curtail overall consumption, which can prompt businesses to cut production, which in turn can mean lower profits, cost cutting, and layoffs.”