Government has welcomed the announcement by the South African Reserve Bank to cut the repo rate by 25 basis points to 8%.

The drop means the prime lending rate will also drop to 11.50%.

Government Communication and Information System (GCIS) Acting Director-General, Nomonde Mnukwa, said the cut will come as a relief for cash strapped consumers.

"The reduction in the interest rate and the sustained decline in inflation provide a welcome reprieve for our citizens. These combined factors are not only helping to lower the cost of borrowing, but also offer significant relief to households struggling with high costs of living," she said.

Mnukwa added that government remains focused on stabilising the economy and "supporting household income".

"It is also inspiring to note that the inflation rate now falls comfortably within the South African Reserve Bank's target range of 3% to 6%, allowing more room for economic planning and investment," she said.

In his announcement of the repo rate cut on Thursday, SARB Governor Lesetja Kganyago said the bank's forecasts expect progress in inflation to be sustained.

"In the near term, we continue to see a dip in headline inflation, supported by the stronger exchange rate and lower oil prices. The implied starting point of the rand is R18.04 to the US dollar, an appreciation of nearly 2% relative to our July assumption.

"This contributes to fuel price deflation, which helps keep headline inflation below 4% through the first half of next year. As usual, we will look through this near-term supply shock, focusing on the medium-term outlook," Kganyago explained.