The Bank of England's target measure of inflation fell to a one-year low in March but remained higher than the bank had anticipated as recently as February, official figures showed today.

The Office for National Statistics said lower gas bills bills helped consumer price inflation - the Bank's target measure - drop to 2.9% in the year to March from 3.2% in the year to February. March's rate was the lowest since March 2008, when inflation stood at 2.5%.

The fall was in line with market expectations but does mean that consumer price inflation in Britain has not fallen as fast as the Bank of England was anticipating when it published its last set of quarterly projections in February. The Bank of England is tasked by government to set monetary policy to hit a 2% in two years time.

The slower than anticipated decline may be largely to do with the sharp fall of the pound in recent months, a rate-setter at the Bank of England said today. A lower pound makes exports cheaper but the price of imported goods higher.

"The recent data suggests that the downward momentum of inflation in the short-term may not be as strong as we thought in February - probably because of the very marked depreciation in sterling since the summer of 2007," said Andrew Sentance, a member of the nine-strong rate-setting panel at the Bank of England.

Nevertheless, CPI inflation has fallen from a peak of 5.2% in September as the British economy sank into recession and global energy costs fell sharply.

Elsewhere, the statistics office said another broad inflation indicator, the retail price index, fell for the first time in nearly fifty years. The retail indicator, which includes housing related costs that the CPI measure does not, fell 0.4% in the year to March, compared with a flat reading for February. March's decline is the first since March 1960.

The decline was expected by most economists as the measure incorporates mortgage interest payments, which have fallen heavily in recent months as the Bank of England has slashed interest rates to get the British economy back on track.

Though the retail price index is not explicitly targeted by the Bank of England when it sets interest rates, it is an important measure of inflation as many wage deals and pension payments are based on it.

Analysts said that there's still a chance that the CPI measure of inflation could also turn negative in the months to come as already announced electricity and gas price cuts feed through and the recession continues to rein in wage demands and consumer spending.

"Although the sterling depreciation has clearly had some upward effect on prices, the wider trend will see headline inflation fall well below the 2% government target," said Charles Davis, economist at the Centre for Economic and Business Research.

The Bank of England's Sentance said the central bank is busy getting its next inflation report ready for May and that an updated forecast for economic growth will be key. In February, the Bank of England's central forecast was that the pace of the British downturn would ease in the current quarter with the economy bottoming out over the summer.

"Though there are still a lot of risks, the economic data since February has been broadly consistent with this projection," said Sentance.

He also said indicated that some green shoots of recovery were appearing in the British economy - he noted that some of the business surveys are now more positive and that there are tentative signs of a pick-up in housing market activity.