New Zealand's central bank has cut its benchmark interest rate for the first time in two-and-a-half years in a move that sent the country's currency to a six-month low.
The Reserve Bank of New Zealand cut the official cash rate (OCR) by 25 basis points to a record low of 1.5 per cent, a change that was foreshadowed by its shift in March to an explicitly dovish footing.
"The Monetary Policy Committee decided a lower OCR is necessary to support the outlook for employment and inflation consistent with its policy remit," the RBNZ's monetary policy committee said in a statement accompanying its rates decision.
"Global economic growth has slowed since 2018, easing demand for New Zealand's goods and services."
RBNZ projections show rates are expected to be steady for the rest of the year.
Inflationary pressure is projected to rise only slowly, the central bank said.
The New Zealand dollar tumbled to a six-month low of 65.25 US cents after the announcement, from 66.00 US cents.
The OCR had been unchanged since November 2016 and a small majority of economists in a Reuters poll had forecast the RBNZ would lower interest rates on Wednesday.
Expectations for the cut had grown in recent months, as New Zealand struggles with weak economic momentum, slowing global growth and inflation falling further below its target.
This was the first cash rate review by the RBNZ's newly-formed monetary policy committee, in a transfer of the decision-making power from the governor alone.
RBNZ said the committee reached a decision by consensus.
"Given this employment and inflation outlook, a lower OCR now is most consistent with achieving our objectives and provides a more balanced outlook for interest rates," the statement said.
New Zealand's labour figures last week showed tepid wage growth, and employment falling, while business sentiment has also remained gloomy, all adding to arguments for a rate cut.
The Reserve Bank of Australia held rates at all-time lows on Tuesday but signalled an easing in the future if the unemployment rate didn't fall.
The Australian dollar dropped sharply from 70.23 US cents to 70.05 US cents after the RBNZ announcement on Wednesday but recovered within an hour.
