The triggers for the cut were last month’s dramatic fall in inflation expectations by New Zealand businesses, taking them to levels last seen in the early 1990s, and a decline in the global outlook.

Part of this global picture includes decisions by central banks in Japan, the EU, and the UK to lower interest rates,  weaker growth in China and other emerging markets, and also a less robust recovery in the US than anticipated at the time of the Reserve Bank’s last statement in December.

The much-publicised drop in the Fonterra milk payout, announced by the dairy cooperative this week, was not a major factor and does not appear to have significantly altered the decision, which had already been made. Rather, it, too, is a reflection of that weaker global economic picture.

And domestically, the price inflation outlook has been slashed. The annual consumer prices index inflation was 0.1% for the year to December, falling instead of rising toward at least the bottom end of the Reserve Bank’s 1-3% target band.

To give a more stark picture of how much the price inflation outlook has come off, only six months ago the Reserve Bank expected price inflation to hit the mid-point of the target band – 2% – by September this year. It now expects inflation only to reach 0.5% by then, and not hit 2.0% until March 2018.

It is not just a local phenomenon. While low price inflation has been a feature of the world  economy since the global financial crisis of 2008, it got weaker during the second half of last year.

This is partly due to the oil price slump but is also due to a more generic decline in core price inflation.

So there is no offshore inflation to import – imported inflation having been an uncontrollable thorn in the side of New Zealand economic policymakers many times in the past.

The one thing that could see a rise in imported inflation is a substantial drop in the New Zealand exchange rate, pushing up the cost of imports.

A lower dollar? 
On this, Mr Wheeler repeated his previous comments that a lower New Zealand dollar would be “appropriate” given the weakness in New Zealand export prices – and a fall in the exchange rate following this morning’s decision is certainly expected.

But not a large one. The dollar has been running, on a trade weighted index (TWI) basis, about 4% higher than expected at the time of the last monetary policy statement in December, and despite urging it downwards, rhetorically, the Reserve Bank’s forecasts in today’s statement forecast only a slight fall over the next few years.

Significantly, though, the Reserve Bank still has a moderately strong outlook for the New Zealand economy. GDP growth this year is forecast slightly higher than it was in December – by 0.2% – with this reversing out over 2017.

Annual GDP growth of 3.1% is forecast for each of the next two March years – a rate above the long-term trend of roughly 2.5-2.8%.

Growth is being supported by high net immigration, which although expected to come off recent peaks is still likely to stay elevated compared to its long-term trend. A great deal of this is due to the lower outlook for the global economy: Compared to many countries, New Zealand is looking quite good right now.

But the housing market has moderated in recent months, partly due to another factor driving the strong growth, a construction boom.

That, while not a deciding factor, has also allowed room for today’s rate cut.

As for his next move, Mr Wheeler says monetary policy will “continue to be accommodative”  and that further easing of policy may be required.

The statement’s 90-day interest rate forecasts imply one more rate cut, probably in June or August but changes to the outlook such as further global declines, which are quite possible, could mean more than one further cut.