WELLINGTON (Xinhua): Most economists expect New Zealand's Reserve Bank to slash interest rates to as low as 5.5 percent this week, following bold cuts around the world as central banks attempt to minimize the looming global recession.

The New Zealand central bank will review the official cash rate on Thursday. The New Zealand economy has been in recession since the start of this year, and is expected to keep shrinking until at least the middle of next year.

Business confidence has fallen to its lowest level in 20 years, and unemployment is expected to rise. On Oct. 23, the Reserve Bank cut the Official Cash Rate by a full percentage point, to 6.5 percent.

Reserve Bank Governor Allan Bollard said earlier the cut was needed because international market turmoil meant the outlook for New Zealand had worsened since the last review in September.

On Sept. 8, it cut the OCR by half a percentage point to 7.5 percent.

The central bank previously reduced the rate from 8.25 percent to 8 percent on July 24, which had been the first cut since July 2003.

Economists expected the Reserve Bank will cut the interest rates by a record 100 basis points or an even more.

Head of research at Bank of New Zealand Stephen Toplis said the market is expecting a three-figure cut, and anything below that could be risky, Radio New Zealand reported on Monday.

He predicted the Reserve Bank will lower interest rates by at least 100 basis points, and as much as 150.

Toplis said current market pricing is already assuming the bank will cut at least 125 basis points.

He said if the bank was to disappoint on that currency would rise sharply and interest rates, including mortgage rates, would go back up.

In the longer term, he expected interest rates to drop to 4 percent by the middle of next year.

Josua Williamson at TD Securities predicted deeper cuts, with interest rates falling to 2.75 percent by the middle of next year.

He said this will be required to restimulate the economy in the absence of any meaningful fiscal policy stimulus from the newly elected Government.

Williamson said the Reserve Bank's focus will be on rescuing the economy when it cuts interest rates this week.