The New Zealand dollar fell by half a US cent after the Reserve Bank kept its official cash rate (OCR) steady at 1.75 per cent, where the bank expects it to remain until 2020.

Westpac senior markets strategist Imre Speizer said the currency had dropped on the back of the bank's more moderate view of economic growth.

"The risks to growth are skewed to the downside," he said.

By 9.45 am the New Zealand dollar was trading at US67.01c, down from US67.50c just befor the 9 am release.


Reserve Bank Governor Adrian Orr said the bank's next move could be up or down.

"While recent economic growth has moderated, we expect it to pick up pace over the rest of this year and be maintained through 2019," he said.

Robust global growth and a lower New Zealand dollar exchange rate will support export earnings, he said.

"At home, capacity and labour constraints promote business investment, supported by low interest rates," he said.

"Government spending and investment is also set to rise, while residential construction and household spending remain solid," he said.

There were some "welcome" "early signs of core inflation rising.

Inflation will increase towards 2 per cent over the projection period as capacity pressures bite, Orr said.

"This path may be bumpy, however, with one-off price changes from global oil prices, a lower exchange rate, and announced petrol excise tax rises expected," he said.


Orr said the bank would keep the OCR "at an expansionary level" for a considerable period to contribute to maximising sustainable employment and maintaining low and stable inflation.

The bank, in its monetary policy statement, pushed out its forecast of OCR increases was pushed out a full year, implying a late 2020 lift.

ASB Bank economists said they expected the OCR to stay on hold until November 2019, though the RBNZ's new view is it will be on hold for longer.

"The important thing is that there is absolutely no urgency for the OCR to increase for a considerable period," ASB said.

The central bank revised down its forecast of the average rate of GDP growth in the four quarters to Q1 2019 from 3.1 per cent to 2.6 per cent.

The OCR has been on hold since November 2016.