The Reserve Bank has announced it has cut the official cash rate from 3.25 per cent down to 3.0 per cent today.

Reserve Bank governor Graeme Wheeler says the move is warranted by the softening in the economic outlook and low inflation, and at this point, some further easing seems likely.

Photo: File.

Global economic growth remains moderate, with only a gradual pickup in activity forecast, but developments in China and Europe have led to heightened uncertainty and increased financial market volatility.

Particular uncertainty remains around the impact of the expected tightening in US monetary policy.

'New Zealand's economy is currently growing at an annual rate of around 2.5 per cent, supported by low interest rates, construction activity, and high net immigration,” says Graeme.

'However, the growth outlook is now softer than at the time of the June statement.

'Rebuild activity in Canterbury appears to have peaked, and the world price for New Zealand's dairy exports has fallen sharply.”

Headline inflation is currently below the Bank's 1 to 3 per cent target range, due largely to previous strength in the New Zealand dollar and a large decline in world oil prices.

Annual CPI inflation is expected to be close to the midpoint of the range in early 2016, due to recent exchange rate depreciation and as the decline in oil prices drops out of the annual figure.

A key uncertainty is how quickly the exchange rate pass-through will occur.

'House prices in Auckland continue to increase rapidly, but, outside Auckland, house price inflation generally remains low,” adds Graeme.

'Increased building activity is underway in the Auckland region, but it will take some time for the imbalances in the housing market to be corrected.”

The New Zealand dollar has declined significantly since April and, along with lower interest rates, has led to an easing in monetary conditions.

While the currency depreciation will provide support to the export and import competing sectors, further depreciation is necessary given the weakness in export commodity prices.