The Reserve Bank has left the Official Cash Rate unchanged at 1.5 per cent, and has signalled it may need to cut the official interest rate "over time".
"Given the weaker global economic outlook and the risk of ongoing subdued domestic growth, a lower OCR may be needed over time to continue to meet our objectives," the bank said in its statement this afternoon.
Domestic growth has slowed over the past year, the central bank said.
"While construction activity strengthened in the March 2019 quarter, growth in the services sector continued to slow. Softer house prices and subdued business sentiment continue to dampen domestic spending," it said.
The global economic outlook has weakened, and downside risks related to trade activity have intensified, the Reserve Bank said.
"A number of central banks are easing their monetary policy settings to support demand. The weaker global economy is affecting New Zealand through a range of trade, financial, and confidence channels," it said.
The Reserve Bank said it expects low interest rates and increased government spending to support a lift in economic growth and employment.
Inflation is expected to rise to the 2 per cent mid-point of the bank's target range, and employment to remain near its maximum sustainable level, it said.
"Given the downside risks around the employment and inflation outlook, a lower OCR may be needed."