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WELLINGTON, March 23 (Xinhua) -- New Zealand's central bank held its official cash rate (OCR) at the historic low of 1.75 percent on Thursday, citing major challenges in the global economy.


Macroeconomic indicators in advanced economies have been positive over the past two months, but major challenges remained with ongoing surplus capacity in the global economy and extensive geo-political uncertainty, said Reserve Bank of New Zealand governor Graeme Wheeler.


Global headline inflation had increased, partly due to a rise in commodity prices, and monetary policy was expected to remain stimulatory, but less so going forward, particularly in the United States, Wheeler said in a statement.


The trade-weighted exchange rate has fallen 4 percent since February, partly in response to weaker dairy prices and reduced interest rate differentials, but further depreciation was needed to achieve more balanced growth, he said.


Gross domestic product growth -- at 0.4 percent -- was weaker than expected in the December quarter, but the growth outlook remained positive, supported by accommodative monetary policy, strong population growth, and high levels of household spending and construction activity.


Prices in the country's pillar dairy sector had been volatile in recent auctions and uncertainty remained around future outcomes.


House price inflation had moderated, but it was uncertain whether the moderation would be sustained given the continued imbalance between supply and demand.


Headline inflation had returned to the target band of 1 percent to 3 percent as past declines in oil prices dropped out of the annual calculation.


"Longer-term inflation expectations remain well-anchored at around 2 percent," said Wheeler.


Monetary policy would remain accommodative for a considerable period.


"Numerous uncertainties remain, particularly in respect of the international outlook, and policy may need to adjust accordingly," he said.


The OCR has been at 1.75 percent since November last year.


The RBNZ's next OCR review will be announced on May 11.


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