New Zealand central bank cuts interest rate by 25 basis points

New Zealand's central bank changed its official cash rate (OCR) for the first time in almost a year Thursday, cutting 25 basis points off to leave it at 3.25 percent.

Reserve Bank of New Zealand (RBNZ) governor Graeme Wheeler cited weakening prices for the country's pillar dairy exports and rebounding petrol prices as factors slowing income and demand growth.

These could delay a return of inflation currently sitting near zero to the midpoint of the RBNZ's target range of 1 percent to 3 percent, Wheeler said in a statement.

"The New Zealand economy is growing at an annual rate around 3 percent, supported by low interest rates, high net migration and construction activity, and the decline in fuel prices," said Wheeler.

"However, the fall in export commodity prices that began in mid- 2014 is proving more pronounced."

With the fall in commodity prices and the expected weakening in demand, the exchange rate had declined from a peak in April, but remained overvalued and a further significant downward adjustment was justified.

"In light of the forecast deterioration in the current account balance, such an exchange rate adjustment is needed to put New Zealand's net external position on a more sustainable path," said Wheeler.

House prices in Auckland the country's largest city and home to a quarter of the population continued to rise rapidly, and increased supply was needed.

Tighter lending controls imposed by the RBNZ and government tax measures to start on Oct. 1 should ease the impact of investor activity in the housing market, he said.

Further cuts in the OCR might be appropriate, depending on the emerging data, he said.

The OCR had been held at 3.5 percent since July last year.

The next OCR review will be announced on July 23.