The double-strength shift was well signposted by the central bank and analysts, with further easing on the way.
The RBNZ updated its forward tracking to suggest an official cash rate (OCR) arriving at 3.25 per cent soon and settling at three per cent in the second half of the year.
"If economic conditions continue to evolve as projected, the (RBNZ) has scope to lower the OCR further through 2025," RBNZ governor Adrian Orr said.
"We are looking at lowering the OCR a little bit quicker than what we projected back in November ... by 50 basis points by the middle of the year."
The cut is welcome news for Kiwi mortgage holders but a further sign of New Zealand's post-pandemic economic catastrophe.
New Zealand is in the grips of a recession and it now appears obvious the OCR was yanked too high in order to get to grips with runaway inflation.
In Australia, the OCR peaked at 4.35 per cent through 2024, whereas in New Zealand, the OCR was hiked to 5.5 per cent in mid-2023 - its highest level in 15 years.
The RBNZ began loosening the OCR in August and Wednesday's cut brings the total loosening to date to 175 basis points.
Mr Orr denied overly tough settings, saying the bank was "prudent to remain cautious".
The Kiwi hard landing is in sharp contrast to Australia, where central bankers on Tuesday made a first OCR cut - from 4.35 to 4.1 per cent - in four years.
Australia appears to have pulled off a soft landing, with 12 consecutive quarters of growth - albeit several at a snail's pace - and unemployment at four per cent.
In New Zealand, gross domestic product contracted by two per cent in the middle of 2024, and joblessness has grown to five per cent and is projected to go higher.
Finance Minister Nicola Willis welcomed the cut.
"The Government knows many families and businesses are doing it tough, but evidence is mounting that they can look forward to better times," she said.
Headline inflation, which peaked at 7.3 per cent in 2023, is now at 2.2 per cent.
ASB chief economist Nick Tuffley noted higher near-term threats to inflation including elevated oil prices and a weak NZ dollar, but said on the whole, the RBNZ may be forced to cut the OCR to below three per cent.
"The risks to the RBNZ's outlook appear mainly downward," he said.
The new economic forecasts released by the RBNZ also show house prices, previously tipped to rise through 2025, instead dropping in price.
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