The Reserve Bank today reduced the Official Cash Rate (OCR) by 25 basis points to 2.25 percent.

The outlook for global growth has deteriorated since the December Monetary Policy Statement, due to weaker growth in China and other emerging markets, and slower growth in Europe.

Commodity prices remain low

Domestically, the dairy sector faces difficult challenges, but domestic growth is expected to be supported by strong inward migration, tourism, a pipeline of construction activity and accommodative monetary policy.

House price inflation in Auckland has moderated in recent months

Internationally, these are to the downside and relate to the prospects for global growth, particularly around China, and the outlook for global financial markets.

Headline inflation remains low

Annual core inflation, which excludes the effects of transitory price movements, is higher, at 1.6 percent.

While long-run inflation expectations are well-anchored at 2 percent

Headline inflation is expected to move higher over 2016, but take longer to reach the target range

Further policy easing may be required to ensure that future average inflation settles near the middle of the target range.

Media release: Statement by Reserve Bank Governor Graeme Wheeler: