OCR Cut: What economists said

The New Zealand dollar immediately dropped half a US cent to as low as 57.48 US cents, and has since headed lower, while in the wholesale market two-year swap rates dropped about six or seven basis points.

A number of banks had cut their lending and deposit rates in the days leading up to the decision.

RBNZ’s decision comes despite the annual consumers price index hovering near the top of its 1% to 3% target range and it appears the central bank is more concerned that cautious behaviour by households and businesses slowing the recovery than it is by inflation getting out of control again.

Economists had been divided ahead of the decision over whether the RBNZ would cut by 25bp, as it forecast in August, or make a bolder 50bp cut.