The Monetary Policy Committee expected New Zealand's headline inflation to return to within the 1 to 3 percent target range in the second half of this year.
The restrictive monetary policy has significantly reduced consumer price inflation, the committee said in a statement.
The committee agreed that monetary policy will need to remain restrictive, the extent of which will be tempered over time consistent with the expected decline in inflation pressures.
The OCR influences the price of borrowing money in New Zealand, and the level of economic activity and inflation, it said.
The decline in inflation reflects receding domestic pricing pressures, as well as lower inflation for goods and services imported into New Zealand, the statement said.
Labor market pressures have eased, reflecting cautious hiring decisions by firms and an increased supply of labor. The level of economic activity, including business and consumer investment spending and investment intentions, is consistent with the restrictive monetary stance, it said.
Current and expected government spending will restrain overall spending in the economy. However, the positive impact of the pending tax cuts on private spending is less certain, it said.
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