The Reserve Bank of New Zealand has cut the Official Cash Rate (OCR) from 5 percent to 3.5 percent.

Reserve Bank Governor Alan Bollard this morning announced the reduction, to its lowest ever level, since it was introduced at 4.5 percent in 1999.

It met expectations by pundits.

The OCR, which influences the price of borrowing money in New Zealand, stood at 8.25 percent in June last year.

It was last below 5 percent in January 2002.

Banks had already started cutting their mortgage rates to the lowest levels in five years in anticipation of the OCR review.