The Reserve Bank has cut the official cash rate by 25 basis points to 3.5%, as widely expected.
The central bank said the economy was facing headwinds, but inflation was contained and there were signs of growth.
It said the impact of tariffs and growing global uncertainty would be watched and influence the pace of further rate moves.
Earlier on Wednesday, Finance Minister Nicola Willis was adamant the government would not overreact to world events outside its control.
She said in a statement following the announcement the drop was good news for New Zealand households.
“That is good news for households because it means lower mortgage rates and more money in people’s pockets to help with the cost of living,” Ms Willis says.
“For example, for someone with a $500,000 mortgage over 25 years, a two percentage point drop in their interest rate reduces their repayments by about $300 a fortnight.
“The fall in the OCR is also good news for businesses because it means more money flowing through their tills.
“The Government knows many families and businesses are still doing it tough but our focus on stopping wasteful spending has made a difference.”
