In a widely anticipated move, the Reserve Bank of New Zealand cut the official cash rate (OCR) 0.5 points to 2.5 percent, equalling a record low set in the midst of the global financial crisis.
Reserve Bank governor Alan Bollard said the February 22 quake had caused substantial damage and immense disruption to New Zealand's second largest city, which economists estimate accounts for 15 percent of the national economy.
"While it is difficult to know exactly how large or long-lasting these effects will be, it is clear that economic activity, most certainly in Christchurch but also nationwide, will be negatively impacted," Bollard said.
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With the Treasury estimating the quake will cost up to NZ$15 billion ($11 billion) and slice 1.5 percentage points off economic growth, Bollard said the central bank needed to take action to reduce its impact.
"We have acted pre-emptively in reducing the OCR to lessen the economic impact of the earthquake and guard against the risk of this impact becoming especially severe," he said.
Previously, the Reserve Bank had kept rates at 3.0 percent since July as the economy struggled to shake off the impact of a recession from early-2008 to mid-2009 and indicated they were likely to rise in the long term.
But Bollard said the quake had changed the economic outlook.
"Signs that the economy was beginning to recover early in 2011 have been more than offset by the Christchurch earthquake," he said.
Rates were last at 2.5 percent between April 2009 and April 2010.
