LONDON (Reuters) - Britain's inflation rate failed to rise as expected last month as petrol prices fell at the fastest rate in more than three years, a boost to consumers ahead of Brexit.
Consumer prices rose at an annual rate of 1.7% in September, matching August's rate that was the lowest since December 2016, the Office for National Statistics said on Wednesday. A Reuters poll of economists had pointed to a 1.8% increase.
The figures suggest the Bank of England's forecast in August that inflation would average 1.6% in the final quarter of this year looks on track.
"Motor fuel and second-hand car prices fell, but were offset by price increases for furniture, household appliances and hotel rooms," ONS statistician Mike Hardie said.
Fuel prices fell by 2.1% compared with a year earlier, their biggest drop since August 2016, the ONS said.
Surveys show expectations of inflation for the next year among the British public have started to cool after reaching their highest level in years.
The BoE has said that underlying inflation pressures mean it may still need to raise interest rates over the medium term -- if there is an end to persistent Brexit uncertainty and the global economy recovers from its slowdown.
The fortunes of the labour market are key to the outlook for British inflation.
Britain's jobs boom has weakened in the approach to Brexit with the number of people in work unexpectedly falling by the most in over four years and unemployment rising, official data showed on Tuesday.
The ONS labour market data showed a dip in the pace of pay
growth which recently hit its fastest in more than 10 years.
Underlying inflation pressures are modest for now.
An ONS measure of core inflation, which excludes energy, fuel, alcohol and tobacco, rose to 1.7% from 1.5%, as expected.
The ONS figures also suggested less short-term pressure in the pipeline for consumer prices.
Among manufacturers, the cost of raw materials - many of them imported - fell 2.8% in annual terms last month, the biggest drop in three years and driven down by the falling cost of crude oil.
That was a bigger drop than any economist had forecast in the Reuters poll, which had pointed to a 1.8% drop.
Manufacturers increased the prices they charged by an annual 1.2% last month compared with 1.7% in August, again weaker than the consensus forecast for a 1.3% rise.
The ONS said house prices in August rose by an annual 1.3% across the United Kingdom as a whole compared with July's seven-year low of 0.8%, marking the first increase in house price inflation in five months. Prices in London alone fell by 1.4%.