Economists expect changes to the Reserve Bank's monetary policy to be made in August after the bank today decided to keep its key settings unchanged.
The bank kept its official cash rate unchanged at 0.25 per cent and its Government bond buying cap at $60 billion, as expected.
It also acknowledged that the country had come out of Covid-19 lockdown quicker than expected, and noted some recent economic data has not been as severe as previously anticipated.
The bank has previously said it expects the decline in annual GDP this year to be the largest in at least 160 years, yet the New Zealand dollar, after slumping to US57c on March 20, has rallied strongly, trading today as high as US65c.
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In its statement, the bank said the stronger New Zealand dollar had "put further pressure on export earnings".
Notes attached to the decision showed that despite the improved data, the Reserve Bank discussed expanding the bond buying programme but not decreasing it.
"In other words, the Reserve Bank is still looking at looser monetary policy, not tighter," Westpac chief economist Dominick Stephens said in a commentary.
"The Reserve Bank has basically kicked the can down the road," he said.
ANZ expects the bond buying programme to be expanded to a cap of $90b when it delivers its next monetary policy statement scheduled on August 12.
Kiwibank also expects to see "much more" by that stage.
But BNZ head of research Stephen Toplis is not so sure.
Toplis, pointing to a heavily oversubscribed $7b syndicated Government bond offer last week, said strong overseas investor demand had acted to keep interest rates low.
"It is as much about the international investors' willingness to fund the Government as it is about the quantum of debt that they are funding," he said.
Toplis said he didn't see anything to suggest that interest rates should change this year.
"If something needs to change, it will be the Reserve Bank's bond buying programme.
"But based on the current information, the need for that is probably one in three," he said.
Negative interest rates have been ruled out for this because not all the banks have the IT infrastructure to deal with them.
The Reserve Bank has given the banks until the end of this year to comply, but some see the possibility of rates going negative next year.
The central bank, in an emergency response to the Covid-19 pandemic, cut its rate by three quarters of a percentage point to 0.25 per cent on March 16 - its lowest ever level.
"New Zealand has contained the spread of Covid-19 locally for now, enabling a relaxation of social restrictions and an earlier resumption of domestic economic activity than assumed in our May Monetary Policy Statement," the bank said in today's statement.
"The Government's intended fiscal stimulus, announced in its May Budget, was also slightly larger than we assumed. These outcomes give cause for some confidence but significant economic challenges remain," it said.
The severe global economic disruption caused by the Covid-19 pandemic was persisting, leading to lower economic activity, employment, and inflation abroad and in New Zealand.
"The negative economic impact on New Zealand is exacerbated by the required international border restrictions, as the vast majority of the world battles to contain the pandemic," it said.
Support for the economy was appropriately being provided through increased fiscal spending.
"However, monetary policy will continue to provide significant support," it said.
On the foreign exchange market, the New Zealand dollar dropped by about 40 basis points in late afternoon trading to US64.64c from US65c just before the 2pm announcement.