For the first time in four years the Reserve Bank has lowered its Official Cash Rate. The rate is now 5.25%, down from the 5.5% it had been at since May last year.

The Reserve Bank's target range for inflation is between one and three per cent and with the rate falling to 3.3% last month, many felt the time was right for the OCR to follow suit.

Major banks have reacted immediately, with Kiwibank and ASB lowering their interest rates minutes after the Reserve Bank announcement.

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