Reserve Bank cuts rate by half per cent

10.05 am

The Reserve Bank has cut the Official Cash Rate by 50 basis points from 5.75 per cent to 5.25 per cent.

Reserve Bank Governor Don Brash said the unscheduled adjustment was primarily because of last week's terrorist attacks on the United States.

"It seems more likely now that the current slowdown in the world economy will worsen. In these circumstances, New Zealand's short-term economic outlook would be adversely affected, although any downturn might well be relatively short-lived.

"New Zealand business and consumer confidence will be hurt by recent international and domestic developments, and today's move is a precaution in a period of heightened uncertainty.

Dr Brash said the Reserve Bank's focus was still on keeping core inflation in check.

"Our present judgement is that interest rates do not need to be as high as previously to achieve this."

The next review of the OCR is scheduled for October 3.