Wellington, October 28 (QNA) - The Reserve Bank of New Zealand held its official cash rate (OCR) at 2.75% on Wednesday, defying market expectations of a rate hike in a split 4-3 decision, as policymakers weighed persistent inflation risks against economic uncertainty.

The bank's Monetary Policy Committee acknowledged that inflationary pressures remained elevated but opted to leave the rate unchanged to allow more time to assess economic conditions and the effects of previous rate increases. It reaffirmed its commitment to returning inflation to the 2% target midpoint over the medium term.

Annual consumer price inflation eased to 3.7% in the September quarter from 4.1% in the June quarter, the bank said. However, it expects inflation to climb to 4.4% in the December quarter, largely reflecting higher fuel prices amid disruptions in global energy markets.

The bank said all committee members agreed on the overall inflation outlook but differed over the relative weight of various risks and the timing of further monetary tightening. While the committee judged that tighter monetary policy would likely be necessary, it stressed that any further action would depend on the economic outlook.

The next monetary policy decision is scheduled for December 9, with the prospect of another rate increase depending on incoming economic data and the persistence of inflationary pressures.

Following the announcement, the New Zealand dollar fell sharply, dropping nearly one US cent to around 55.9 US cents, as markets adjusted to the unexpected decision to hold rates. (QNA)