Reserve Bank surprises markets with 1% OCR

Economists predicted the Reserve Bank would cut the OCR by 25 basis points in the face of slow economic growth and global concerns. But the central bank's Monetary Policy Committee has stunned markets by making its biggest cut since March 2011.

ASB economist Nick Tuffley said the RBNZ has decided to "front foot" and take more drastic action now.

"It's a surprise and we are really seeing the Reserve Bank catch up with market pricing below 1%. The key question is: where do they go from here? At this stage we think there will be another cut to 0.75%."

The Reserve Bank has forecast the OCR could dip below 1% next year.