UK consumer price inflation dropped unexpectedly in March due to strong downward effects from transport and a smaller rise in fuel prices than the same period a year ago, official data showed on Tuesday. The Office for National Statistics said the consumer price index rose by 0.2 percent on the month for a 1.1 percent year-on-year rate, the lowest annual rate since September 2002. That compared with consensus forecasts for 1.3 percent and is now well below the Bank of England's 2.0 percent target. That comes even as financial markets widely expect the BoE to raise base interest rates next month to 4.25 percent. The figures again showed the divide between consumer goods inflation, which fell by 0.6 percent year-on-year last month and all services inflation, which rose by 3.1 percent compared with the same month a year ago.
The ONS said the main downward influence on the CPI came from transport costs, while smaller petrol and diesel price rises compared with the same period last year also dragged down the overall rate of inflation in March. Airfares to many UK destinations and places in Europe also fell this year but rose a year ago. Separately, the ONS said the old measure of inflation, RPIX, rose by 0.3 percent on the month and 2.1 percent on the year, also below consensus forecasts for a 2.3 percent rise.///