(Adds details, context on economy and policy outlook)
New Zealand's central bank on Wednesday held the official cash rate (OCR) at a record low of 1.50%, but said lower rates may be needed over time to meet inflation and employment objectives in the face of rising global pressure and downside risks to growth.
"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 NZD=D4 rose 0.2% to $0.6646 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 2 percent mid-point of RBNZ's target range, and employment to remain near its maximum sustainable level, it said.
Minutes of 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."
Indeed, RBNZ Governor Adrian Orr is unlikely to hold fire for too long, with most economists predicting a rate cut in August, underlining a global shift to easier monetary policy amid rising economic risks.
Last week, both the U.S. Federal Reserve and the European Central Bank reversed course and opened the door to new stimulus, while the Reserve Bank of Australia (RBA) has said it's likely to ease again to follow up from its cut earlier this month.
Sino-U.S. trade tensions as well as softening domestic housing and immigration growth have put pressure on New Zealand's economy.
"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."
While first gross domestic product growth figures released last week topped expectations, the broad picture highlighted a soft underbelly. The Treasury department last month cut its GDP growth forecast to 2.1% for the 12-months ending June 30, from the 2.9% expansion predicted in December. (([email protected]; +6448028163; Reuters Messaging: [email protected]; Twitter: http//twitter.com/pravemn))
