Underlying British inflation dropped to 2.5 per cent in the year to January, hitting the government's target for the first time in eight months.

The Office for National Statistics said the headline rate of inflation fell to 3.3 per cent, falling in line with the underlying rate, which excludes home loan payments.

The figures tend to justify the Bank of England's decision to leave base rates at 7.25 per cent last week. It will release its quarterly inflation report on Wednesday which is expected to forecast inflation on track.

Figures yesterday showed retail spending hit an 18-month high in the first month of the year.

The British Retail Consortium said retail sales were up 6.1 per cent in the year to January.