The Reserve Bank said it would keep its official cash rate (OCR) unchanged at 1.75 per cent, in line with market expectations.
The bank said a recovery in commodity prices and more positive business and consumer sentiment in advanced economies have improved the global outlook. However, it said major challenges remained in the form of on-going surplus capacity in the global economy and rising geo-political uncertainty.
New Zealand's financial conditions had firmed with long-term interest rates rising and continued upward pressure on the New Zealand dollar exchange rate.
"The exchange rate remains higher than is sustainable for balanced growth and, together with low global inflation, continues to generate negative inflation in the tradables sector," the bank said in a statement.
"A decline in the exchange rate is needed."
This morning the New Zealand dollar was little changed, holding just above 73 US cents, ahead of the Reserve Bank statement.
Finance Minister Steven Joyce confirmed on Tuesday that Gorvernor Graeme Wheeler would not seek a second term and will step down on September 26.
He will deliver two more OCR announcements before he steps down.
Deputy Governor Grant Spencer will take over the top job on an interim basis.
A media conference will begin at 10am, then at 1pm RBNZ officials are due to appear before the parliament's finance and expenditure committee.