Washington, Aug 14 (IANS): Inflation in July dropped to the lowest point in the last three years in the US, according to data released on Wednesday, setting up a likely rate cut by the Federal Reserve next month.

Data from the US Bureau of Labor Statistics showed the annual inflation rate in July hit 2.9 per cent, going under 3 per cent for the first time since March 2021.

Inflation surged to a 40-year high of 8.6 per cent in June 2022, setting off a string of interest rate hikes by the US Federal Reserve to cut spending and cool down the economy.

The Federal Reserve is widely expected to announce a cut next month amid signs of recovery.

"We have more work to do to lower costs for hard working Americans, but we are making real progress, with wages rising faster than prices for 17 months in a row," US President Joe Biden said, adding: "Prices are still too high. Large corporations are sitting on record profits and not doing enough to lower prices. That is why we are taking on Big Pharma to lower prescription drug prices. We are cutting red tape to build more homes while taking on corporate landlords that unfairly increase rent. And we are taking on price gouging and junk fees to lower everyday costs from groceries to air travel."

High prices have emerged as a key issue in the 2024 presidential elections with former US President Donald Trump, who is the Republican nominee for president, holding the Joe Biden-Kamala Harris administration responsible for it. He has made "ending inflation" a top promise for his re-election bid.

Democratic nominee for presidential post, Kamala Harris, has acknowledged prices are still high, and like US President Joe Biden, sought to shift some of the blame on to corporations.

But she is expected to make a more detailed case when she announces her economic policy sometime this week.