(Updates to add comment from economists, Q4 labour data)
WELLINGTON, Feb 3 (Reuters) - A surprise drop in New Zealand's unemployment rate to more than six-year lows and comments from the central bank governor who said he won't cut rates just because headline inflation is low added to views the bank is likely to leave interest rates unchanged in March.
Last month, the central bank left the official cash rate on hold at 2.5 percent but there have been growing calls for rate cuts, possibly as early as next month, as annual inflation is hovering around 0.1 percent.
The central bank is mandated with keeping inflation between 1 percent and 3 percent.
On Wednesday, however, Governor Graeme Wheeler said the bank would avoid a "mechanistic approach" to monetary policy as that can lead to an "inappropriate fixation on headline inflation."
The speech was "a direct shot across the bow to those arguing that low headline inflation and the persistence of it were reasons for a lower official cash rate," said ANZ Senior Economist Philip Borkin.
Wheeler said there are many factors to take into consideration when determining monetary policy and noted that core inflation is within the target band and inflation expectations are encouraging.
He underscored that inflation is currently low because of the decline in oil prices in particular.
Wheeler said that oil prices are a factor that can legitimately cause inflation to be outside the target band, and therefore the bank can look through them when assessing monetary policy.
"It would be inappropriate to attempt to offset the low oil price effect through the official cash rate," he said.
Wheeler also said the central bank would be keeping a close eye on emerging economic and financial data.
The latest labour data likely reduced the odds of a rate cut in the near term as "there is no unemployment smoking gun turning up the heat on a lower OCR," said Borkin.
New Zealand's jobless rate fell to 5.3 percent in the fourth quarter, the lowest since March 2009, data showed on Wednesday. Economists polled by Reuters had forecast an unemployment rate of 6.1 percent.
However, while most economists rule out a March rate cut, several said the worrying global economic backdrop might force the central bank's hand later in the year.
ASB Bank Chief Economist Nick Tuffley said he is sceptical the unemployment rate will remain at the fourth quarter's low level and he still expects the central bank to cut the rate by another 50 basis points from June.
Wheeler on Wednesday underscored that monetary policy will continue to be accommodative and recognized that most of the risks facing New Zealand's economy are on the downside.
"If concerns deepen around the prospects for the global economy and its impact on New Zealand, some further policy easing may be needed over the coming year," he said.
Last week, the central bank kept its benchmark interest rate at 2.5 percent but opened the door to further easing after all but slamming it shut in December.
