U.S. import prices recorded their biggest drop in seven months in March as the cost of petroleum declined, but the underlying trend pointed to a moderate rise in imported inflation as the dollar's rally fades. The Labor Department said on Wednesday import prices fell 0.2 percent last month, the largest drop since August, after an upwardly revised 0.4 percent increase in February. That lowered the year-on-year increase in import prices to 4.2 percent from 4.8 percent in February. Economists polled by Reuters had forecast import prices slipping 0.2 percent last month after a previously reported 0.2 percent increase in February. The drop in import prices is unlikely to be sustained with oil prices pushing higher in recent days amid rising geopolitical tensions following last week's U.S. missile strike on Syria and reports that Saudi Arabia wants to extend production cuts enacted in January for another six months. Despite weak imported price pressures, domestic inflation is rising. Most consumer inflation measures have pushed above the Federal Reserve's 2 percent target. Prices for imported petroleum fell 3.6 percent last month, the biggest drop since August, after increasing 1.3 percent in February. Import prices excluding petroleum increased 0.2 percent after rising 0.3 percent the prior month. Import prices excluding petroleum have now increased for three straight months, in part reflecting an ebb in the dollar's rally. Prices for imported capital goods edged up 0.1 percent in March after rising 0.2 percent in February. Imported consumer goods prices excluding automobiles fell 0.2 percent last month after gaining 0.3 percent in February. The cost of imported food fell 0.7 percent last month after increasing 1.0 percent in February. The report also showed export prices rose 0.2 percent in March after advancing 0.3 percent the prior month. Export prices increased 3.6 percent from a year ago, the biggest rise since December 2011. That followed a 3.2 percent gain in February.

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