The Reserve Bank has cut the official cash rate (OCR) by 50 basis points to a two year low of 4.25 percent, as expected, saying a second consecutive super sized cut was justified by slowing inflation and weaker economy.

The 50-basis-point cut brings the OCR to its lowest level since November 2022.

It follows a 50-point cut to 4.75 percent in October.

"Annual consumer price inflation has declined and is now close to the midpoint of the Monetary Policy Committee's 1 to 3 percent target band. Inflation expectations are also close to target and core inflation is converging to the midpoint," 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.

An indicative forecast in the monetary statement suggested a slower rate of cuts next year with the cash rate falling to around 3.5 percent by the end of next year.

Economists had overwhelmingly forecast the big cut as the economy remained weak, households and businesses kept tight control on spending and investment, and the unemployment rate kept rising.

The RBNZ acknowledged the weak state of the economy, but said there were signs an improvement was coming now that inflation was back in its 1-3 percent target band.

"Economic growth is expected to recover during 2025, as lower interest rates encourage investment and other spending."

The MPC said external risks from geopolitical tensions and political uncertainty could stoke economic and inflation volatility in the medium term.

Three retail banks - the Co-operative, Kiwibank and ASB - were quick to cut their floating home and business lending rates.

Prime Minister Christopher Luxon and Finance Minister Nicola Willis are scheduled to speak about the OCR about 2.30pm. You can watch via the livestream at the top of this story.