The Reserve Bank has cut its benchmark cash rate by 50 basis points.

The central bank cut the official cash rate (OCR) to 4.75 percent, as expected, to its lowest level in 18 months, saying the bigger than usual rate cut was justified by slowing inflation and the slack in the economy.

"The Committee agreed that it is appropriate to cut the OCR by 50 basis points to achieve and maintain low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates, and the exchange rate," the Monetary Policy Committee (MPC) said in a statement.

It said the speed and size of future rate cuts would be determined by economic data.

Retail banks have been quick to cut lending rates in anticipation of the big sized cut.

Within minutes of the Reserve Bank's announcement that it would cut the official cash rate, two of the main banks had revealed they were lowering home loan interest rates.

ASB said it would cut its variable home loan rate from 8.39 percent to 7.89 percent.

Its Orbit rate would drop to 7.99 percent.

Executive general manager, personal banking, Adam Boyd said 120,000 customers would be affected.

"We do expect this downward OCR trend to continue into 2025 which will provide further relief."

ASB was also cutting savings rates - its on-call interest rate would drop from 2.65 percent to 2.15 percent. The Headstart youth account rate would drop from 4.75 percent to 4.15 percent.

Earlier in the day, ASB announced cuts of 10 basis points across a number of fixed terms, and a 16bop reduction for the one-year rate.

BNZ said it, too, would pass on the full OCR cut to variable home loans.

General manager, home lending products James Leydon said the OCR cut would be welcome news for many households.

"We are continually assessing our interest rates and looking for opportunities to pass on rate reductions to our customers. Customers will benefit from our latest variable rate change which is effective from tomorrow," Leydon said.

"BNZ will continue to move quickly in response to changes in external factors, including the Official Cash Rate and wholesale interest rates, to ensure we're passing rate changes on to our customers as quickly possibl."

Kiwibank said on Tuesday it was reducing its variable rate by 50bps.

More to come...

-RNZ.