Inflation, as measured by the producer price index, fell seven-tenths of a percentage point to 2.6% for the year ending in August, the Bureau of Labor Statistics reported Wednesday, a sign that price pressures may not be building as much as thought.

On a month-to-month basis, the price index decreased by 0.1%, less than the 0.3% increase that was expected.

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Core PPI inflation, which strips out volatile food and energy prices, increased 2.8% on an annual basis. Core inflation fell 0.1% on a monthly basis.

There is ongoing uncertainty about how Trump’s sweeping tariff agenda might affect prices. It is also unclear to what degree they will complicate the Federal Reserve’s mission to drive down inflation while keeping the economy and labor market afloat.

The Fed’s goal is 2% annual inflation, and, while various inflation gauges show annual price growth running hotter than that, there have been indications that the labor market is slowing, which could prompt the Fed to cut rates by more than expected.

The economy added just 22,000 jobs in August, and the unemployment rate rose to 4.3%, the Bureau of Labor Statistics reported last week. Also, the July jobs report revealed that some 258,000 fewer jobs were added in May and June than previously reported. 

Additionally, on Tuesday the BLS announced that labor market growth for the 12 months ending in March was 911,000 jobs less than previously reported.

Taken together, the labor market data show that the jobs market is and has been weaker than expected.

The Fed has a dual mandate, price stability and maximum employment. Because of the weaker jobs numbers, investors are anticipating that the Fed will cut interest rates by more in the coming months.

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Investors put the odds of a rate cut at a near certainty next week, according to the CME Group’s FedWatch tool, which calculates the probability using futures contract prices for rates in the short-term market targeted by the Fed.

It is also worth noting, that despite the disappointing jobs revisions, economic output has been up. U.S. gross domestic product expanded at a 3.3% annual rate in the second quarter, the Bureau of Economic Analysis reported in its most recent projection.