WELLINGTON, May 27 (Xinhua) -- New Zealand's central bank held its benchmark interest rate steady on Wednesday, citing uncertain global conditions and inflation pressures from the Middle East conflict.

People walk past a bank in Auckland, New Zealand, Nov 20, 2022. (File photo: Xinhua)

The Reserve Bank of New Zealand's Monetary Policy Committee voted to hold the official cash rate at 2.25 percent.

Annual consumer price inflation was 3.1 percent in the March quarter. Inflation is expected to peak at 4.3 percent in the September quarter and return to the 2 percent target mid-point in mid-2027, the bank said in a statement.

Core inflation, wage growth and medium- to long-term inflation expectations remain consistent with inflation returning to target over the medium term, the statement said.

"The Middle East conflict is increasing near-term inflation and weakening economic activity," noted the committee.

The global economic backdrop remains uncertain, with supply chain disruptions, higher petrochemical prices and a fragmented trading environment impacting the outlook, it said, adding that New Zealand's trading partners are expected to see weaker growth and higher inflation.

Domestically, business confidence and spending are weaker, consumer confidence has fallen sharply, and the housing market remains weak. Rising costs are squeezing profit margins and curbing investment and hiring intentions for some firms, the statement said.

The official cash rate "will most likely need to increase sooner and by more than envisaged," the committee said, noting the pace will depend on persistent wage- and price-setting behavior versus weaker economic activity.