The Reserve Bank has held the Official Cash Rate at 2.5%.
Governor Graeme Wheeler said on Wednesday that global financial market sentiment remains buoyant and the medium-term outlook for New Zealand's overall trading partner GDP growth remains firm.
''Growth in the New Zealand economy has picked up. Consumer spending has increased and rebuild activity in Canterbury is gaining momentum.
''House price inflation is high in some regions, despite prices already being elevated. The bank does not want to see financial or price stability compromised by housing demand getting too far ahead of supply.
"Fiscal consolidation is constraining aggregate demand. In addition, drought has lowered agricultural production and will likely also negatively affect farm output in the coming season.
''International dairy prices have spiked higher in response to the drought, but these price gains could prove temporary.''
Mr Wheeler also said the New Zealand dollar remains overvalued and is higher than projected in March.
''Further appreciation has occurred partly in response to the announcement of a substantial quantitative easing programme in Japan.
''The high New Zealand dollar continues to be a significant headwind for the tradables sector, restricting export earnings and encouraging demand for imports.''
Official inflation remains low at 0.9% for the year to March - but the Bank expects that to gradually rise towards 2%.
Mr Wheeler said the Reserve Bank expects to keep the OCR unchanged through the end of the year.
The rate has been 2.5% since 10 March, 2011.
