MercoPress. South Atlantic News Agency

New Zealand cuts basic interest rate to help with earthquake recovery

The country’s second city was virtually flattened

New Zealand's central bank has cut the cost of borrowing to try to reduce the economic impact of the earthquake in Christchurch, the country's second largest city. The Reserve Bank of New Zealand cut the key interest rate 0.5 points to 2.5%.

The central bank's move is aimed at cushioning an economy that was just starting to emerge from recession. The 6.3 magnitude quake that hit on February 22 caused substantial damage and shattered business confidence.

”We have acted pre-emptively in reducing the OCR (official cash rate) 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.

The interest rate has been at 3% since April last year, and before that was at a record low of 2.5% during the global financial crisis. Thursday's 50 point cut brings the cost of borrowing back to that low level again.

”This is a big move and we just didn't think there was any point in doing little ones,“ said Mr Bollard on Radio New Zealand.

”We consider this is a one-off move… but if we find very bad news coming through we can always change our minds.“ he added.

Mr Bollard said this was an emergency situation that had left New Zealand facing a ”quite severe” downturn. Authorities say the cost of rebuilding after the earthquake will be about 11 billion US dollars.