OREANDA-NEWS. March 12, 2015. New Zealand's central bank held its benchmark rate steady on Thursday, and adopted a markedly neutral tone as it signalled it could be on hold for an extended period while leaving the door open for a possible cut.

The Reserve Bank of New Zealand (RBNZ) said inflation was expected to remain lower for longer because of the sharp fall in oil prices, but while the economy was growing strongly there was no need to change rates.

"Our central projection is consistent with a period of stability in the OCR," RBNZ Governor Graeme Wheeler said in a statement, as the official cash rate (OCR) was kept at 3.50 percent for a fifth consecutive review.

The bank's statement was similar to the January statement, repeating that: "Future interest rate adjustments, either up or down, will depend on the emerging flow of economic data."

But the RBNZ's forecast of wholesale 90 day bank bills , taken as a proxy for the OCR, was lowered from the December statement, and indicated at 3.7 percent through to early 2017.

The RBNZ said inflation, which fell to 0.8 percent in the year to December, was expected to stay below 1 percent through 2015, and said the outlook was more muted, although it was expected to head back to 2 percent over the medium term.

However, it said if there was a significant fall in inflation expectations it would "warrant a more supportive monetary policy".

The New Zealand dollar initially popped up to \\$0.7251, from around \\$0.7200, with the RBNZ repeating its now-familiar warning that the currency was unjustifiably and unsustainably high, and needed a "substantial correction" to help the external balance. The kiwi has since pulled back and was last at \\$0.7215.

Interest rate futures mostly rose, pushing their implied yields lower.

A Reuters poll had expected no move at this review, with the next move a rise in the first quarter of next year.

The central bank said the economy was growing at more than 3 percent, boosted by strong construction activity, and household incomes which have been lifted by the fall in fuel prices and low interest rates.

However, it said the sharp fall in dairy prices, which are down around 40 percent on a year ago, the impact of drought in parts of the country, and the high exchange rate would weigh on growth.

It also warned that the housing market, especially in the country's biggest city Auckland, was showing signs of picking up.

It said the global outlook was more volatile, although trading partner growth was seen as similar to last year.