New Zealand's central bank has held the official cash rate (OCR) at a record low of 1.50 per cent but says lower rates may be needed over time to meet inflation and employment objectives.
"Given the downside risks around the employment and inflation outlook, a lower OCR may be needed," the Reserve Bank of New Zealand's (RBNZ) monetary policy committee said in a statement accompanying the rates decision.
The bank lowered its cash rate by 25 basis points at the last meeting in May, and all 15 economists polled by Reuters had predicted policymakers would stand pat at this week's meeting to assess conditions.
The New Zealand dollar rose 0.2 per cent to 66.46 US cents after the decision was announced.
The central bank said it expected low interest rates and increased government spending to lift economic growth and employment.
Inflation is expected to rise to the two per cent mid-point of RBNZ's target range, and employment to remain near its maximum sustainable level, it said.
Minutes of the meeting released along with the statement showed that the committee reached a consensus to keep policy steady but noted more support from monetary policy was "likely to be necessary".
"The global economic outlook has weakened, and downside risks related to trade activity have intensified," RBNZ said in its statement.
"The weaker global economy is affecting New Zealand through a range of trade, financial and confidence channels."
The Treasury department last month cut its GDP growth forecast to 2.1 per cent for the 12-months ending June 30, from the 2.9 per cent expansion predicted in December.
