The 25 basis points cut was widely signposted and expected, and marks the first decision with acting governor Christian Hawkesby at the helm.
Former governor Adrian Orr left the Reserve Bank of New Zealand (RBNZ) unexpectedly in March amid reports of a behind-the-scenes battle with the government.
Mr Hawkesby has continued where Mr Orr left off, taking an axe to lending rates given the country's economic woes and inflation, at 2.2 per cent, is largely under control.
"While monetary restraint has been removed at pace, household spending and residential investment have remained weak," Mr Hawkesby said in a note on Wednesday.
The RBNZ began cutting the OCR in August, when it stood at 5.5 per cent, and hasn't stopped.
To borrowers, New Zealand's OCR of 3.5 per cent may compare favourably to Australia's 4.1 per cent, however that does not mean Kiwi efforts to tame inflation have been more successful than Australia.
NZ endured a recession in 2024, with GDP falling by more than two per cent in the middle six months, and also suffered from a higher unemployment rate, at 5.1 per cent.
Australia enjoyed continued - if low - growth and an unemployment rate of four per cent.
In short, Australia may have stuck a soft landing from the COVID-19 pandemic shock, but NZ has careered into the dirt.
And it may get worse, given the tariffs levied against the trade-exposed nation by the United States.
"The recently announced increases in global trade barriers weaken the outlook for global economic activity. On balance, these developments create downside risks to the outlook for economic activity and inflation in New Zealand," Mr Hawkesby noted.
"As the extent and effect of tariff policies become clearer, the Committee has scope to lower the OCR further as appropriate. Future policy decisions will be determined by the outlook for inflationary pressure over the medium term."
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