Reserve Bank of New Zealand cuts rates to record low 1.75%

New Zealand's central bank cut its benchmark interest rate to a record low of 1.75 percent on Thursday, the third easing this year, but added this latest move was likely enough to get inflation back into its target range.

The local dollar briefly rose more than a third of a U.S. cent to $0.7342 as the market assumed the Reserve Bank of New Zealand (RBNZ) was now done cutting interest rates.

The bank projected rates at 1.7 percent next year, suggesting only a 20 percent chance of a cut.

"Clearly, the bank is in a bit of wait-and-see period now because they are pretty sure inflation is going to rise from here and then they have a pretty hard conviction on growth remaining strong," said JP Morgan economist Ben Jarman.

Mark Coote | Bloomberg | Getty Images

The kiwi dollar was last at $0.7310, having been as high as $0.7395 soon after the statement.

It is one of the best performing major currencies in the world, up nearly 7 percent this year. The RBNZ repeated that a decline in the exchange rate was needed as it was higher than is sustainable.

"Our current projections and assumptions indicate that policy settings, including today's easing, will see growth strong enough to have inflation settle near the middle of the target range," said RBNZ Governor Graeme Wheeler in a statement.

"Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly," he added.

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