• Reserve Bank cuts official cash rate by 25 basis points to 3.25 percent
• Debate on whether to hold OCR, 5-1 vote to cut
• RBNZ statement omits any mention of future possible cuts Second consecutive small cut as RBNZ cautious, lowest OCR since September 2022
• RBNZ says economy faces challenges, inflation expected to stay in band despite spike
• Outlook uncertain, impact of tariffs on NZ and global growth, inflation, markets unclear

The Reserve Bank has cut the official cash rate by 25 basis points to 3.25 percent, as widely expected, but had a division of opinion whether to hold or cut.

The central bank delivered a second consecutive small rate cut, which it had signalled in April after a succession of large cuts last year, but did not mention the prospect of future rate cuts as it had done in previous statements.

"The case for lowering the OCR to 3.25 percent highlighted that CPI inflation is in the target range and there is significant spare capacity in the economy," the Monetary Policy Committee (MPC) meeting record showed.

Economists overwhelmingly forecast the cut, as the economy remained soft because of the uncertainty caused by the US tariff policy and households and businesses keeping tight control on spending and investment.

However, the committee minutes showed a debate on whether to hold at 3.5 percent or cut.

"In considering the merits of holding the OCR unchanged at 3.50 percent for this meeting, some members noted that this would allow the Committee to better assess whether increased economic policy uncertainty was having a noticeable impact on household and firm behaviour."

The MPC voted 5-1 to cut the rate, only the second time in its short history it's recorded a split vote.

The RBNZ said it expected inflation, which spiked to 2.5 percent in the first quarter of the year, should return to the desired 2 percent target point over time.

Forecasts issued with the statement indicated weak economic growth for most of the year, and pointed to a further 25 basis point cut to 3.0 percent by the end of the year.