In a bid to stimulate the economy, the Official Cash Rate has been cut again this morning to 3%. This takes it down by 50 basis points from the previous 3.5%, the third cut in less than four months.

Reserve Bank Govenor Allan Bollard has noted that the 525 basis points in which the OCR has been reduced in the last 6 months is taking interest rates to very stimulatory levels. While credit growth is easing alongside the weak economy, the RBNZ expects lenders to continue pushing financial loans through on sound business propositions, which will support the economy’s recovery.

Additionally, the changes in monetary policy settings and stimulus from fiscal policy, together with the sizeable exchange rate depreciation, will act to further support the NZ economy. Bollard hopes to see activity gradually picking up after the middle of 2009.

The OCR, Official Cash Rate, has been cut for the second time in two months by another 150 base points, taking it from 5% to 3.5%.

Reserve Bank Governor Allan Bollard announced the cut this morning, which is the lowest ever since the OCR was introduced in 1999 at 4.5%.

Financial experts predict that it could drop again in coming months a further 100 points, bringing it down to 2.5%.

With interest rates now lower than ever, real estate is becoming more and more affordable, with banks already lowering their mortgage rates in anticipation of the cut. Conversely, the OCR cut is bad news for those with money in the bank who will now earn less interest on their savings.

Today the Official Cash Rate (OCR) was slashed by 150 base points (1.5%) from 6.5% down to 5% by the Reserve Bank Governor Allan Bollard.

There has been speculation over the past week with many initially expecting a drop of 100 base points. In the last few days the common expectation appeared to have shifted to a likely 150 base points which puts interest rates at a 5 year low.

The move has broken records for the largest drop since the OCR was introduced in 1999.

Banks have started to reduce their interest rates accordingly with Alan Bollard directly pushing for this outcome quickly;

“To ensure the response we are seeking, we expect financial institutions to play their part in the economic adjustment process by passing on lower wholesale interest rates to their customers.”