The Reserve Bank left has left its official cash rate unchanged at 2.50%, but has hinted heavily that more rate cuts may be necessary later this year.
The bank said in a statement this morning that monetary policy will continue to be accommodative.
"Some further policy easing may be required over the coming year to ensure that future average inflation settles near the middle of the target range," the bank said.
Prices for a range of commodities, particularly oil, remain weak. Financial market volatility has increased, and global inflation remains low.
The domestic economy softened during the first half of 2015 driven by the lower terms of trade.
"However, growth is expected to increase in 2016 as a result of continued strong net immigration, tourism, a solid pipeline of construction activity, and the lift in business and consumer confidence," it said.
The bank also noted that the New Zealand dollar had declined but that there was room for it to fall further. "A further depreciation in the exchange rate is appropriate given the ongoing weakness in export prices," it said.
The central bank cut its official rate four times in the second half of last year to 2.50% - its lowest ever point.
