Traders and economists tipped an interest rate cut as a foregone conclusion and a minority were betting the stubbornly high kiwi was a big enough threat to its policy targets to prompt governor Graeme Wheeler to reduce the official cash rate by 50 basis points in one move.
The New Zealand dollar rallied by US1c in the first few minutes of trading after the statement's release to just over US73c.
The 25 basis point cut was in line with market expectations.
Global growth was below trend despite being supported by unprecedented levels of monetary stimulus, the bank said in a statement.
Looking ahead, the bank said more cuts may be required.
"Monetary policy will continue to be accommodative," it said.
"Our current projections and assumptions indicate that further policy easing will be required to ensure that future inflation settles near the middle of the target range," it said. The central bank aims to get inflation within an annual 1 to 3 per cent range.
Banks are not expected to pass on the full official cash rate to home-buyers because of rising funding costs.
Deposits have not kept pace with loan growth meaning banks are having to fund more of their lending through the international money market and the cost of borrowing in that market has increased because of concerns over slowing growth in China, fall-out from Brexit and the US elections.
ANZ is the first bank to cut floating lending rates in response to this morning's cut but home buyers will get just a tiny fraction of the benefit.
But the country's largest bank said it would only slice 0.05 percentage points off the floating rate for its floating home loans and flexible business loans.
Bigger cuts will be made available to its commercial, agricultural and business borrowers with floating rates cut by 0.15 percentage points for those lenders but even they do not get the full 0.25 cut made by the central bank.
However the bank did have some good news for savers - where it plans to increase some term deposits by up to 0.3 percentage points.
ANZ chief executive David Hisco said ANZ was refocusing its lending and borrowing emphasis.
"On the deposits side, we have five times as many customers as those with home loans. Lifting term deposit rates will help customers grow their savings," Hisco said.
"We are sending a strong signal today to New Zealanders that at a time of record low interest rates, it is more responsible to pay down home loans and save, than borrow more. New Zealanders need to consider changing their financial strategies."
The bank will also provide a special rate to first home buyers who use KiwiSaver slicing off 0.20 percentage points.
Westpac economists said they also expected a further 25 basis point cut to the rate in November, taking it to a low of 1.75 per cent.
"However, we acknowledge that the September official cash rate review is 'live', and that there could be more than one further rate cut in the coming months," the bank said.
ANZ senior economist Phil Borkin said the market had reacted to the statement being not as "dovish" - or soft on inflation - as many had expected.
"The Kiwi has popped higher on the back of this because the market was expecting a more dovish signal from the Reserve Bank," Borkin said.
"We think that that will maybe fade because there are significant risks that the official cash rate will go significantly lower from here," he said.
