U.S. inflation eased in July, with consumer prices rising just 0.1% for the month, according to the Bureau of Labor Statistics.

Core inflation, which excludes food and energy, increased 0.2%, while the annual inflation rate fell to 3.4%.

The moderate data reduced expectations that the Federal Reserve will raise interest rates at its September meeting, with markets putting the odds of a hike at about 42%.

Energy prices fell 1.5%, while shelter and food prices each increased 0.1%, helping keep overall inflation contained, CNBC has reported.

The Fed will receive another month of inflation data before its September meeting, leaving open the possibility that its rate decision could still change.