Renaissance Capital: Romanian Leu Must Not Firm Too Much Ahead Of Euro Adoption

05.05.2011 By Florentina Dragu

The Romanian central bank can’t afford a too strong leu if it wants to adopt the euro in 2015, because the country needs a strong exchange rate in the years prior to joining the euro area, Thursday said Charles Robertson, chief economist at Renaissance Capital.

Robertson estimates an exchange rate around 4 lei per euro on the long term.

He said the central bank has limited tools to control the inflation and it shouldn't be blamed for missing the inflation target.

Romanian annual inflation accelerated to 8% in March, the highest rate since August 2008.

The central bank estimates the rate will increase further in the second quarter of 2011, driven by pressure generated by surging global prices for food and fuels.

The bank targets an annual inflation of 3% at the end of 2011, plus/minus one percentage point around the band.

On Thursday, the central bank announced it has raised its forecast for the December annual rate to 5.1% from 3.6% previously.