Economists almost universally expected the central bank to cut its official cash rate by 25 basis points to 2.75 percent, which has built on the two 25 bp cuts that occurred in June and July, but what happens after the announcement is less clear.
Most economists expect the bank to now retain an easing bias, with some tipping the rate to drop to 2 percent by early next year.
The New Zealand dollar dropped by about US1c after the Reserve Bank cut its official cash rate by 25 basis points to 2.75 percent and heavily hinted that more cuts would follow.
Some home lenders - eager to get the marketing jump on their competitors - have already moved their mortgage rates lower in anticipation of a rate cut cut.
On Tuesday, ASB Bank matched the 4.35 percent special one-year rate the BNZ unveiled last week. It is the lowest home loan rate New Zealand has seen since the 1960s.
The Reserve Bank said it had opted to cut its official cash rate by one quarter of a percentage point to 2.75 percent, making it the third rate reduction from the central bank so far this year, and said further monetary policy easing "seemed appropriate".
The bank also said further declines in the exchange rate were also appropriate, given the sharp decline in commodities prices.
Global economic growth remained moderate, but the outlook has been revised down due mainly to weaker activity in the developing economies, the bank said in a statement.
Domestically, the economy is adjusting to the sharp decline in export prices, and the consequent fall in the exchange rate, it said.
Several factors continued to support growth, including robust tourism, strong net immigration, the large pipeline of construction activity in Auckland and other regions, and the lower interest rates and the depreciation of the New Zealand dollar.
"While the lower exchange rate supports the export and import-competing sectors, further depreciation is appropriate, given the sharpness of the decline in New Zealand's export commodity prices," Reserve Bank Governor Graeme Wheeler said in a statement.
"A reduction in the official cash rate is warranted by the softening in the economy and the need to keep future average CPI inflation near the 2 percent target midpoint," the bank said. "At this stage, some further easing in the official cash rate review seems likely."
Today's rate cut was widely anticipated in the financial markets and follows two rate cuts of 25 basis points each in June and July.
The Reserve Bank, whose central goal is price stability, has had little to worry about on the inflation front in recent years.
The bank defines price stability as annual increases in the consumers price index of between 1 and 3 percent on average over the medium term, with a focus on keeping future average inflation near the 2 percent target midpoint.
The last time inflation got close to 2 percent was in calendar 2011, when it rose by 1.8 percent on the CPI.
Very low oil prices, and up until recently a New Zealand strong dollar, have helped to put a lid on inflation. In the oil markets, benchmark West Texas Intermediate last traded at US$45 a barrel - half the price of where it was a year ago.
