OCR left unchanged at 2.25pct
The Reserve Bank has left the official cash rate (OCR) unchanged at 2.25 percent, but hinted it could get lower.
Governor Graeme Wheeler has indicated that future reductions are still possible.
"Further policy easing may be required to ensure that future average inflation settles near the middle of the target range."
The global financial outlook appears to have stabilised and commodity prices have also recovered modestly. But the bank says the world economy is still weak and there are significant risks.
Economic activity in New Zealand is being driven by net immigration, the tourism and construction sectors and the Reserve Bank's "accommodative" monetary policy.
However, Mr Wheeler says export prices are still too low for most farmers, so the dairy sector is moderating growth in other areas.
The Reserve Bank also repeated previous concerns over the high exchange rate and house price inflation, particularly in Auckland but also in other regions.
It last lowered the OCR in March, bringing it down from 2.5 percent to an historic low of 2.25 percent.
The rate was left unchanged in in April.
Opposition parties are blaming the Government's handling of the Auckland housing market for the bank putting the OCR on ice.
Labour's finance spokesman Grant Robertson says Mr Wheeler's words were "extraordinarily blunt" at Thursday's announcement -- a contrast to his normally diplomatic approach -- particularly about the housing situation.
"That's effectively a shot across the Government's bow. Their failure is putting the financial stability of this country at risk."
The Green Party says interest rates are "higher than they need to be" and it has a flow-on effect.
"National's failure to fix the Auckland housing crisis is forcing the Reserve Bank to keep interest rates higher, hurting families, exporters, and jobs," co-leader James Shaw said.
"If National had tackled the Auckland housing crisis instead of choosing to do as little as possible, households and small businesses could be benefitting from lower interest rates right now."