The Reserve Bank today reduced the Official Cash Rate (OCR) by 50 basis points to 2.5 percent.

In the past few months, the bank has slashed the OCR from 8.25 percent to today’s record low of 2.5 percent.

The country’s homeowners are now hoping they will see the benefit of the headline rate cut passed in full to their mortgage interest rates.

The Reserve Bank is meanwhile hinting that it may not yet have finished cutting rates and that further modest cuts may be in the pipeline.

Reserve Bank Governor Alan Bollard said:

“While the New Zealand economy has not experienced the same extreme falls in economic activity as seen in a number of our trading partners, it remains weak. Business sentiment is low, investment has been curtailed and employment reduced.

“We expect the large decline in the OCR over the past year to pass through to more borrowers over coming quarters as existing fixed-rate mortgages come up for re-pricing. This, together with the stimulus from fiscal policy, will act to support the New Zealand economy and eventually see activity trough and pick up thereafter.

“However, the scale of the global financial crisis and domestic adjustments underway are such that it is likely to be some time before economic activity returns to robust and healthy levels.”

“We consider it appropriate to provide further policy stimulus to the economy. We expect to keep the OCR at or below the current level through until the latter part of 2010.

“The OCR could still move modestly lower over the coming quarters.”