The debate is growing about whether the Reserve Bank should make a jumbo sized cut to the official cash rate next month.
Financial markets are pricing in a 20 percent chance of a 75 basis point cut in November, and there are suggestions it may be necessary with the next meeting not taking place until February next year.
BNZ's head of research Stephen Toplis said it is not out of the realm of possibility, a 50 basis point cut is far more likely.
He said there have only been three times the central bank has moved rates by 75 points or more.
"During the Global Financial Crisis, when Lehman's collapsed and banking balance sheets looked dreadful, we actually had a 100 basis point cut and two 150 basis point cuts in short shrift. But that was at a time when we were really worried that the entire banking sector would fall over.
"Then we went into the global pandemic. It delivered a 75 basis point cut there, and of course in the first days and weeks of that pandemic, we really felt really worried about what was going to happen. We had forecasts of unemployment rates rising to 20 percent and the world falling over.
"The last time they moved, was actually 75 basis points upward when the CPI surprised them by a massive 0.8 percent. The recent CPI surprise was 0.1 percent which really isn't a surprise at all."
Toplis said there isn't anything disastrous happening to the economy to justify such a large cut and it could run the risk of pushing inflation back up again.
The economist said interest rates need to come down below 4 percent to stimulate the economy.
But he said they can't drop too quickly because consumers have borrowed on short terms and will get the financial perks of lower rates much sooner.
"Most people are rolling over six months mortgage interest rates so they're going to get their bang for their buck quite quickly. We all talked a lot about the tax cuts and what that was going to deliver, that was sort of $20 a week for the average punter.
"But these mortgage rate cuts for some people are delivering hundreds of dollars a week. Now, that will change [spending] behaviours, but we just need to be conscious that we don't actually just flood the economy with money again and not see what impact it's having."
Toplis said there is no need to panic because it is clear the RBNZ wants to get interest rates down to get the economy going again.
