New Zealand keeps interest rates at record low

New Zealand's central bank left interest rates at a record low of 2.5 percent on Wednesday, predicting they would remain there for the rest of 2013 with low inflation and a surging local currency.

The official cash rate (OCR) has remained on hold since March 2011 and financial markets had not expected any movement from the Reserve Bank of New Zealand (RBNZ).

Governor Graeme Wheeler said that while growth in New Zealand was firm, a drought had affected agricultural production and government cutbacks were impacting on overall demand in the economy.

He said the New Zealand dollar was rising, partly due to Japan's policy of monetary easing, which was restricting export earnings and stimulating demand for imports.

With inflation sitting at 0.9 percent and expected to remain at the bottom of the bank's 1.0-3.0 target band, Wheeler said interest rates were not likely to change in the short term.

"At this point, we expect to keep the OCR unchanged through the end of the year," he said in a statement.