New Zealand announced an "emergency" interest rate cut in response to the Christchurch earthquake Thursday, warning that the already struggling economy risked nosediving after the disaster. The Reserve Bank of New Zealand slashed the official cash rate (OCR) 0.5 points to 2.5 percent in a bid to cushion the quake's economic fallout, equalling a record low set in the midst of the global financial crisis.
"We have acted pre-emptively in reducing the OCR to lessen the economic impact of the earthquake and guard against the risk of this impact becoming especially severe," Reserve Bank governor Alan Bollard said in a statement. He said the February 22 quake caused substantial damage and immense disruption to New Zealand's second largest city, which economists estimate accounts for 15 percent of the national economy.
The disaster, which is believed to have killed more than 200 people, shattered business confidence in an economy already hobbled after weaker-than-expected growth in late 2010, he said. The central bank chief later described the cut as a one-off response to an emergency situation that had left New Zealand facing a "quite severe" downturn, saying he did not expect rates to come down further.
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