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THE New Zealand Reserve Bank cut interest rates by a quarter of a per cent, taking official rates to 6 per cent, because of the slowing growth in the countries trading partners.
The cut - which follows quarter per cent cut in March - comes after figures showed New Zealand's consumer price index fell by 0.2 per cent in the March quarter.
This put the annual inflation index back to 3.1 per cent from 4 per cent three months ago.
The fall was driven by a large reduction in public housing rents and falling petrol prices and international airfares.
Economists predicted the inflation rate was in little danger of increasing and would fall within the Reserve Bank's target of below 3 per cent in the second half of this year.
ANZ bank chief economist Bernard Hodgetts said the bank would probably cut a further quarter of a per cent off interest rates in its May monentary policy statement.
"History suggests that they probably mean what they say in terms of their reluctance to throw caution to the winds and cut rates more aggressively at this point," he said.
Deutsche Bank senior economist in Auckland Darren Gibbs said that despite Dr Brash's cautious tone, the market was evenly divided on another cut of 0.25 or 0.5 per cent.
The size of the cut would depend on how much worse the world economic situation became and where Australia and the US rates moved, he said.
But the Reserve Bank is still concerned about inflation with Dr Brash saying: "World prices for our commodities remain robust and the exchange rate has fallen back since March.
"These unexpected developments, if they persist, could take much of the disinflationary sting out of weakening global demand.
"In addition, significant parts of the economy are operating near to capacity and the labour market is relatively tight.
"It is for these reasons that we are only cautiously moving the official cash rate in the same direction as official interest rates in other countries."