New Zealand's central bank has cut its benchmark interest rate to a record low 2.25 percent and said it could go lower yet as the country grapples with weak international growth and lower prices for its crucial dairy exports.

The timing of the Reserve Bank's quarter-point cut Thursday took many economists by surprise. Most had expected the bank to cut rates but to do it later in the year.

The New Zealand dollar fell more than 1 percent and was trading at US$0.665.

Reserve Bank Governor Graeme Wheeler said in a statement there had been a decline in inflation expectations and there was a risk those expectations became self-fulfilling.

New Zealand has kept its interest rates higher than many nations since the 2008 global financial crisis.