"CPI (consumers price index) inflation is currently at a low level despite above-trend growth. However, inflation is expected to increase as the expansion continues," Wheeler said in a statement. "A period of assessment remains appropriate before considering further policy adjustment."
Today's statement removed the bank's previous view that "further tightening will be necessary to keep inflation near the 2 percent target", reinforcing analysts' forecasts for a later resumption of tighter policy which included four rate hikes earlier this year. The bank had already signalled a slower pace of rate hikes in its September forecast for the 90-day bank bill rate, trimming 50 basis points from the projected horizon.
"We expect the OCR to remain unchanged at 3.5 percent, the pause duration to extend, and the resumption of the tightening cycle to become conditional," Westpac Banking Corp senior market strategist Imre Speizer said in a note before the release.
"The resumption of the tightening cycle is now likely to be not until September 2015, rather than Q2 2015."
The New Zealand dollar dropped following the Reserve Bank statement. The local currency fell as low as 77.70 US cents from 78.13 cents immediately before the 9am statement. It was recently trading at 77.87 US cents.
