Adrian Orr and the Reserve Bank Monetary Policy Committee have kept the Official Cash Rate on hold at 5.5 per cent.

The New Zealand dollar fell in the minutes following the 2pm release.

By 2.05 pm, the Kiwi was trading at US58.93c compared with US59.14c just before the announcement.

Westpac strategist Imre Speizer said the currency had come off because the message from the Reserve Bank was not as “hawkish’' as the market had expected.

 “The market was expecting a hawkish shift in the language and that did not occur,” he said. “It was largely a repeat of the bank’s August one-pager and so that is a dovish surprise for the market,” Speizer said.

Given tight pre-election timing and the fact third-quarter inflation data will not be known until October 17, economists had mostly expected the rate to stay put.

But a hike was not completely ruled out and a more aggressive tone was expected from the Reserve Bank (RBNZ).

The central bank’s Monetary Policy Committee agreed interest rates might need to remain at a restrictive level for a more sustained period of time.

 “Interest rates are constraining economic activity and reducing inflationary pressure as required,” the central bank said this afternoon.

“Demand growth in the economy continues to ease. While GDP growth in the June quarter was stronger than anticipated, the growth outlook remains subdued.”

The RBNZ said with monetary conditions staying restrictive, spending growth was expected to decline further.

“Globally, economic growth remains below trend and headline inflation has eased for most of our trading partners.”

Core inflation had eased, but to a lesser extent.

Global pressures

“Weakening global demand is putting downward pressure on New Zealand export volumes and prices. Apart from oil, global import prices have eased.”

The imbalance between supply and demand was moderating but a prolonged period of subdued activity was needed to reduce inflationary pressure, the bank added.

“There is a near-term risk that activity and inflation do not slow as much as needed.”

And in the medium term, a greater slowdown in global economic demand, especially in China, could weigh more on commodity prices and New Zealand export revenue, the central bank added.

Even with the RBNZ holding the rate at 5.5 per cent, the mood locally and internationally had shifted since the August Monetary Policy Statement.

The bank said the OCR needed to stay at restrictive levels for longer.