New Zealand's central bank on Wednesday cut benchmark interest rates by 50 basis points to 2.5%, bringing the policy rate to its lowest level since July 2022 as growth worries loom.

The cut to the overnight cash rate was larger than the 25 basis points expected by economists polled by Reuters.

In its statement , the Reserve Bank of New Zealand said inflation was likely to return to its 2% target by the first half of next year, while pointing to weak economic activity in the middle of 2025, warranting a sharper rate cut.

"Slow growth in disposable incomes and house prices continue to weigh on economic activity, but lower interest rates are supporting a recovery in consumption," the bank said.

New Zealand's GDP contracted more than expected in the second quarter, declining 1.1% year on

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