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Prices in the US rose by less than expected last month, as inflation in the economy remained tame.

The Labor Department's Consumer Price Index (CPI) inched up 0.1% last month, only a slight improvement on a stagnant June figure.

Economists polled by Reuters had expected a 0.2% month-on-month increase.

The dollar fell on the inflation data, as markets felt it made the prospects of further rate rises less likely.

The annual rate of inflation rose to 1.7%, up from 1.6% in June.

Rising medical care costs, housing and food pulled the CPI up in July, after no change in June and May's 0.1% dip.

Prices for meat had their largest one-month gain in almost three years, adding 1%. Prescription drug prices rose 1.3% in July after increasing 1% in the prior month.

The US Federal Reserve has a 2% inflation target for the world's largest economy, although the measure that it tracks is currently at 1.5%.

The Fed has raised interest rates twice this year, and there is speculation that the bank will lift rates again before the end of 2017.