The Reserve Bank looks to be leaning towards a more "dovish" stance in response to weaker-than-expected growth numbers, economists said.

The decision to leave the rate unchanged at 1.75 per cent was well anticipated by the market, but the tone of Reserve Bank Governor Adrian Orr's comments nevertheless came as a surprise.

Economists said a rate hike was now a long way off, and that a cut was not completely out of the question.

Orr, in his statement, kept the door open, saying the bank was well-positioned to manage change in either direction – up or down – as necessary.


He said the outlook for the New Zealand economy, as detailed in the bank's May monetary policy statement, remained intact.

"Employment is around its sustainable level and consumer price inflation remains below the 2 percent mid-point of our target, necessitating continued supportive monetary policy for some time to come," he said.

Global economic growth was expected to support demand for New Zealand's products and services.

"Global inflationary pressure is also expected to be higher but remain modest. This outlook has been tempered slightly by trade tensions in some major economies," he said.

"Domestically, ongoing spending and investment, by both households and government, is expected to support growth," he said.

He also noted the ongoing volatility in some emerging market economies.

Orr was quite downbeat on growth, saying recent weaker GDP outturn implied marginally more spare capacity in the economy than the bank had anticipated.

He also said the Government's projected spending "impulse" was also slightly lower and later than anticipated.

CPI inflation was likely to increase in the near term due to higher fuel prices. Beyond that, inflation was expected to gradually rise to within the bank's desired 2 per cent annual target, resulting from capacity pressures, Orr said.

ANZ senior macro strategist Phil Borkin said he viewed the statement as being "marginally more dovish" than the previous one in May.

"The Reserve Bank is acknowledging a few more risks, globally, the deterioration of the domestic growth picture at the margin, and a bit more spare capacity," Borkin said.

Borkin said it looked as if the bank was showing a greater preparedness to act if conditions deteriorated.

He said a rate cut at some point could not be ruled out if the economy deteriorates to a meaningful extent. "But we are not at that point today."

ASB economists said the message from the central bank was that it was "comfortably on hold" but that the risks have been shifting to a later start to the tightening cycle.

The Auckland-based bank now expects the tightening cycle to start in November 2019 from its previous forecast of a hike in August of that year.

"We also see growing risk that the next move may be a cut, rather than a hike," ASB said.

The Reserve Bank, in its statement, said the best contribution it could make to maximising sustainable employment, and maintaining low and stable inflation, was to ensure the OCR is at an expansionary level "for a considerable period".

Today's statement follows ANZ's business confidence survey for June, which suggested a further slowdown in the economy was in store.

Data out earlier this month showed the rate of growth slowed a little in the March quarter to 0.5 per cent from a 0.6 per cent increase in each of the previous two quarters.

Westpac chief economist Dominick Stephens said he was surprised that the central bank looked to be less bullish about economic growth.

Stephens noted the Reserve Bank had assessed the Government's May Budget as less stimulatory than previous forecasts. "We disagree with that," he said.