With the threat of a US tariff-led global downturn growing by the day, rates may continue to fall for some time yet, and as low as 2.75 per cent.
Wednesday's 25 basis points cut was widely signposted by the Reserve Bank (RBNZ) and expected by markets.
It is the first call with acting governor Christian Hawkesby at the helm, following Adrian Orr's departure as governor in March amid reports of a behind-the-scenes battle with the government.
On rates, Mr Hawkesby has continued where Mr Orr left off.
He had little choice, given the country's economic woes and inflation, at 2.2 per cent, is largely under control.
"While monetary restraint has been removed at pace, household spending and residential investment have remained weak," Mr Hawkesby said in a note on Wednesday.
Kiwi banks moved quickly to pass on the reductions in their variable lending rates, with ASB, Westpac and Kiwibank moving in the 30 minutes afterwards.
The RBNZ began cutting the OCR in August, when it was at 5.5 per cent, and hasn't stopped since.
Mr Hawkesby is also concerned by the tariffs levied by the United States against his trade-exposed nation.
"These developments create downside risks to the outlook for economic activity and inflation in New Zealand," Mr Hawkesby noted.
"As the extent and effect of tariff policies become clearer, the (RBNZ) has scope to lower the OCR further as appropriate. Future policy decisions will be determined by the outlook for inflationary pressure over the medium term."
ASB chief economist Nick Tuffley said the atmosphere led his bank to downgrade its OCR forecast to 2.75 per cent, which the bank will reach in August after three more 25bp cuts.
"Over time, the fog of uncertainty will clear a bit ... our view is that the balance of risks to the OCR is tilted towards the RBNZ needing to set the OCR at a stimulatory level," he said.
Like Australia, NZ received the lowest tariff rate of 10 per cent from US President Donald Trump.
The Treasury also posted an economic note on Wednesday illustrating the downstream risks to NZ of tariffs elsewhere.
"The new tariffs raise significant downside risk to the outlook for NZ exports if they are not eventually reduced," it read.
"In Asia, which accounts for 70 per cent of New Zealand's international trade, many economies are facing tariffs of 24 per cent or more and the risk of markedly slower growth in the region is high."
The rates cut was cheered by Finance Minister Nicola Willis, who said it would bolster household budgets.
"For someone with a $500,000 mortgage over 25 years, a two percentage point drop in their interest rate reduces their repayments by about $300 a fortnight," she said.
To borrowers, New Zealand's OCR of 3.5 per cent may compare favourably to Australia's 4.1 per cent, however that does not mean Kiwi efforts to tame inflation have been more successful than Australia.
NZ endured a recession in 2024 - when GDP fell by more than two per cent in the middle six months - and also suffers from a higher unemployment rate, at 5.1 per cent.
By comparison, Australia has enjoyed growth, though at low rates, and a current unemployment rate of four per cent.
In short, Australia may have stuck a soft landing from the COVID-19 pandemic shock, but NZ has careered into the dirt.
The RBNZ will next meet to consider rates on May 28.
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