RBNZ cuts OCR to record low 2.5%

"We expect to keep the OCR at or below the current level through until the later part of 2010," Bollard said in Wellington today.

Interest rates have been slashed 5.75 percentage points since July, when Bollard bet inflation would abate as the economy headed deeper into recession.

The annual rate of inflation slowed to 3% in the first quarter, back within the central bank's target band and the lowest since the third quarter of 2007. Inflation was 3.4% in 2008. Bollard, who last year embarked on the steepest easing since the OCR's inception a decade ago, has "room to go further in responding to deteriorating economic conditions," the OECD said in its country report this month.

New Zealand's economy may contract 0.8% this year before weak growth resumes in 2010, the central bank forecast in its March monetary policy statement.