WASHINGTON (AP) — Price increases moderated in the United States last month in the latest sign that the inflation pressures that have gripped the nation might be easing as the economy slows.

Consumer inflation reached 7.7% in October from a year earlier and 0.4% from September, the government said Thursday. The year-over-year increase, down from 8.2% in September, was the smallest rise since January. Stripping out volatile food and energy prices, “core” inflation rose 6.3% in the past 12 months and 0.3% from September.

The numbers were all lower than economists had expected.

Helping to ease inflation from September to October were used car prices, which dropped for a fourth straight month. Clothing and medical care also fell. Food price increases slowed. By contrast, energy prices rebounded in October after declines in August and September.

Even amid a tentative easing of inflation, the Federal Reserve is will likely continue raising interest rates to cool the economy and stem inflation. Yet data released Thursday raises the possibility that the Fed could at least slow its rate hikes — a prospect that sent U.S. markets soaring.

“We expect this to mark the start of a much longer disinflationary trend that we think will convince the Fed to halt its (hikes) early next year,” said Paul Ashworth, chief North American economist at Capital Economics, a consulting firm. “With supply shortages normalizing, deflationary pressure is now finally showing up.”

Many economists fear that the central bank’s maneuvers could spark a recession by next year. The Fed has raised its benchmark interest rate six times in sizable increments this year, heightening the risk that the cost of borrowing money for homes, autos and other big-ticket items, will tip the world’s largest economy into recession.

Lorie Logan, president of the Federal Reserve Bank of Dallas, said Thursday’s figures “were a welcome relief,” but added “there is still a long way to go.”

Acknowledging that rate hikes can lead to layoffs and falling home prices, Logan said the Fed “must do everything we can to restore price stability.” Yet she also opened the door to a more modest pace of rate increases, saying “we should also try, if we can, to avoid incurring costs that are higher than necessary.”

Thursday’s data and reaction by officials like Logan make it more likely that the Fed will lift rates by a half-percentage point at its next meeting in December, economists said, a step down from the string of three-quarter point hikes this year.

In the midterm elections that ended Tuesday, roughly half of voters cited inflation as the top factor, according to VoteCast, an extensive survey of more than 94,000 voters nationwide conducted for The Associated Press by NORC at the University of Chicago. About eight in 10 said the economy was in bad shape, and a slim majority blamed President Joe Biden for worsening inflation. Just under half said factors beyond Biden’s control were to blame.

Economic anxieties may have contributed to the loss of Democratic seats in the House of Representatives, though Republicans failed to score the huge political gains that many had expected. And a sizable chunk of voters — 44%, according to VoteCast — said their top concern was the future of democracy, an issue emphasized by Biden and Democratic congressional candidates in an era of unfounded election denial.

Even before the release of Thursday’s figures, inflation by some measures had begun to ease and could continue to do so in coming months. There is evidence that the robust pay increases of the past 18 months have leveled off and begun to fall. Though worker pay is not a primary driver of higher prices, it can compound inflationary pressures if companies offset higher labor costs by raising prices.

Except for automakers, which are still struggling to acquire the computer chips they need, supply chain disruptions have largely unwound.

Malcolm Wilson, CEO of logistics firm GXO, said there has been significant improvement in supply chains.

“Supply and manufacture has been a little easier,” he said. “I wouldn’t say all the disruptions have gone away, but it’s been easier.”

GXO, which operates warehouses on behalf of large companies, including manufacturers such as Boeing and large retail chains, has also found it easier to staff up for the holidays. Last year, the company had to pay additional bonuses to find the workers it needed, on top of pay raises the implemented over the past two years. This year it hasn’t needed to pay the extra incentives to find people with more people looking for work.

“We are probably at the top of the inflation curve,” Wilson said. Shipping costs for both overseas carriers and road transport have come down significantly since the height of the pandemic, he said.

The nation’s job market remains resilient, however. Employers have added an average of 407,000 jobs a month, and the unemployment rate is 3.7%, close to a half-century low. Job openings remain at historically high levels.

But the Fed’s rate hikes have inflicted severe damage on the American housing market. The average rate on a 30-year fixed mortgage has more than doubled over the past year and topped 7% this week. As a result, investment in housing collapsed in the July-September quarter, falling at a 26% annual rate.

Rents, according to outlets like ApartmentList and Zillow, have also begun to fall and that should begin to show up in government data soon, signaling weaker inflation.

The U.S. has managed to dodge inflation levels that have seeped into other national economies after a global pandemic. Inflation is squeezing people around the world, with Russia’s invasion disrupting food and fuel supplies to countries in Africa, Asia and the Middle East, while their currencies have weakened against a strong U.S. dollar, further pushing up costs.

Higher prices are taking a higher toll in Europe, which is feeling the acute effects of an energy crisis triggered by Russia’s war in Ukraine. Rising prices, especially for food and energy, have unleashed a wave of protests and strikes as the cost of living soars.

Inflation hit a record 10.7% in the 19-country euro area last month, largely driven by energy prices, and though European leaders have approved relief packages to help with energy bills, the discontent threatens political turmoil.

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Courtney Bonnell in London contributed to this report.