The Reserve Bank has left its benchmark interest rate unchanged, as expected, and repeated that rates will stay high for an extended period.

The Official Cash Rate was held at 5.5 per cent, where it has been since May, with the RBNZ repeating that inflation was slowing under the pressure of its rate rises, but that it still remained too high.

"However, ongoing excess demand and inflationary pressures are of concern, given the elevated level of core inflation," the Monetary Policy Committee says in a statement.

"If inflationary pressures are to be stronger than anticipated, the OCR will likely need to increase further."

The committee says the surge in migration is now posing threats to inflation by stoking demand in the economy.

The reference of a possible further hike is also aimed at financial markets which have been pricing in the chance of rate cuts as early as May next year.

The RBNZ's forecast track for the OCR published alongside the statement pointed to no prospect of cuts before 2025.

"Interest rates will need to remain at a restrictive level for a sustained period of time, so that consumer price inflation returns to target and to support maximum sustainable employment," says the committee.

Other forecasts show inflation returning to the 1-3 per cent target band in the second half of next year, while the economy posts low growth for the first half of next year.

The New Zealand dollar gained close to half a cent against the US dollar after the statement on the threat of a possible rate rise.

Economists have expected the OCR to stay where it was, with inflation falling from last year's peak but at 5.6 per cent, still well above the target range of 1-3 per cent.

Hawkish hold

ASB economists label the statement as hawkish, with the RBNZ showing more concern about the upside risks to inflation.

"The RBNZ statement hammered home the message that interest rates need to remain high for a sustained period, and with some risk a further OCR increase would be needed if inflation pressures turn out to be persistently stronger than expected," says ASB chief economist Nick Tuffley.

"This message was a shot across the bows of those picking a relatively swift start to the eventual easing cycle."

ASB continues to expect the RBNZ will hold the cash rate at 5.5 per cent, with no cuts until early 2025.

"But the balance of risks around that view now looks more even than we had been thinking ahead of the statement," says Tuffley.

Westpac chief economist Kelly Eckhold says his first impression is that the RBNZ is concerned further rate increases might be needed towards the middle of next year.

"Key will be migration and housing market indicators over the next few months and the next couple of CPI outturns. The new government's fiscal projections in the HYEFU [half-year economic and fiscal update] before Christmas will also be a key focus," he says.

ANZ economists agree the RBNZ is "more hawkish" than expected.

"As long as the threat of another hike is live, there is a limit to how far the market can rally. And we suspect that was an objective today," they say.

Infometrics chief forecaster Gareth Kiernan says the statement is "another significant change of tone" from the central bank's previous statement in October.

"This statement puts financial markets on notice over summer, and persistent strength in demand between now and the next review on February 28 could lead to a rate hike in early 2024," he says.

"At this stage, our view is that the bank is 'jawboning' markets and is trying to ensure that interest rate cuts are not priced in by the market prematurely."

PM wieghs in

"It was incredibly disappointing to see the Reserve Bank having to say we may have to take interest rates higher, essentially because of the abysmal economic management of the last Labour government," says Prime Minsiter Christoper Luxon.

"There has been economic vandalism on a scale that we have not seen before."

Asked what concrete things he's going to do to resolve the domestic-driven inflation, he says they have three more Cabinet meetings and a schedule outlined "making sure that we're getting very intentional, and we're driving the wasteful spending programme and getting the wasteful spending out of the system".

He met with the Reserve Bank governor earlier this week, he says.

"We are united on a goal of going after inflation. He can only go so far if we have our fiscal situation sorted and under control, and that's why we need to go through government spending."

The meeting with the Reserve Bank governor and the Secretary of the Treasury was constructive and positive and Luxon has confidence in the central bank to bring inflation down, he says.

-RNZ.