New Zealand’s central bank cut its benchmark interest rate by a record full percentage point on Thursday and warned that ongoing financial market turmoil will further constrain the country’s recession-hit economy.

It is the Reserve Bank of New Zealand’s third cut since July and lowers the official cash rate to 6.5 per cent. It came despite news this week that the country’s rate of inflation had reached an 18-year high of 5.1 per cent.