Year-over-year inflation reached its lowest level in more than three years in July, the latest sign that the worst price spike in four decades is fading and setting up the Federal Reserve for an interest rate cut in September. Measured from a year earlier, prices rose 2.9%, down from 3% in June. It was the mildest year-over-year inflation figure since March 2021. The government said nearly all of July's inflation reflected higher rental prices and other housing costs, a trend that, according to real-time data, is easing. As a result, housing costs should rise more slowly in the coming months, contributing to lower inflation.