The NZX-50 index closed up 5 points, or 0.15%, at 3630 and the dollar was up US0.5c at US78.14 at 5pm, but was starting to slide.
The 90-day interest rate, a key mortgage rate indicator, was down at 8.83%. The Australian market was trading down 0.5% at 5pm New Zealand time.
Scrambling to shore up the faltering US economy, the Fed cut interest rates again by 0.25%, a smaller amount that predicted late last week.
Wall St, which showed an early rally, pulled back on concerns that the reduction might be the last. The Fed is expected to pause to see if months of rate cutting and billions of dollars in stimulus checks are enough to lift the US out of its slump.
Chairman Ben Bernanke led a divided Fed in an eight-two vote to cut the key rate by 0.25% to 2%. New Zealand's official cash rate is 8.25%.
Prime lending rates for millions of US consumers and businesses fell by a corresponding amount, to 5%.
The Fed, which has been dropping rates since last September, turned much more forceful early this year when housing, credit and financial problems worsened. Rate reductions in January and March marked the most aggressive intervention in 25 years.
Although the US central bank did not take another cut off the table, a growing number of economists believe that rates will stay where they are for the rest of the year.
Bank of New Zealand chief economist Tony Alexander said the New Zealand Reserve Bank had become less hawkish about interest rates.
"We still expect the first easing in December but there is a risk it comes before that. Which then raises an interesting question: Does Finance Minister Michael Cullen feel he would put a pre-election rate cut at risk by cutting personal income tax rates from October, rather than April next year?''
The Reserve Bank had allowed for a $1.5 billion in tax cuts from April. An October start would mean a higher inflation track than forecast and a reduced chance of an early easing, he said.
A tax cut ahead of the election would affect the 1.9 million people classified as employees in the household labour force survey.
An interest rate cut would affect hardly anyone immediately. It would probably not stop anyone with a fixed rate maturing before the end of the year rolling on to a higher rate.
On average, they were rolling off 8.1% and on to rates of 9.5% or above. A 0.25% reduction would make little difference to their pain, Mr Alexander said.
It was not guaranteed that an official cash rate cut would cause mortgage rates to fall, given rising bank funding costs offshore.
"Politically, as long as Dr Cullen feels an October tax rate cut would not cause a rise in interest rates ahead of the election... then he could probably easily get away with delivering [a] tax cut this year, Mr Alexander said.
