The Reserve Bank has cut the official cash rate by 25 basis points to 5.25%.
It's the first cut in four years - with the RBNZ saying it was confident inflation was under control and would land and remain in the 1-3 percent target zone.
Expectations had been rising the central bank might cut the rate for the first time in four years.
The New Zealand dollar fell by about a third of a cent following the announcement to 60.4 US cents.
The RBNZ said the pace of future rate cuts would depend on the monetary policy committee's confidence that pricing behaviour was consistent with a low inflation environment, and inflation expectations anchored around the 2 percent target.
In the immediate aftermath of the rate cut, Kiwibank reduced various lending and deposit rates.
Notably, Kiwibank's variable term loan was also reduced by 25 basis points.
Wholesale interest rates have been falling recently as financial markets surmised the rate might fall for the first time since March 2020.
The Reserve Bank started increasing the cash rate in late 2021 in response to high inflation, with the OCR reaching its current peak of 5.5 percent in May last year.
However, in recent months, economic data shows inflation slowing, unemployment rising and economic growth stalling.
A Reuters poll of 31 analysts showed 19 expected the cash rate to be held steady.
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