BNR: Stable Exchange Rate Preferable On Long Run

05.05.2011 By Florentina Dragu

Romania's central bank targets a stable exchange rate of the leu versus the euro, even if a stronger leu would help the disinflation process on the short term, central bank governor Mugur Isarescu said Thursday.

"The leu's appreciation can be benefic on the short-term, but we are not interested in a short-term effect, but in a balanced exchange rate. We don't believe that an excessive appreciation is sustainable," Isarescu told a news conference.

He said foreign investor confidence has improved in the recent period, which puts pressure on the exchange rate by attracting volatile inflows.

"The volatile capital flows render things more complicated. This helps us on the short run, but it could make us falter on the medium- and long-term.

The inflation targeting is not compatible with extreme price fluctuation," Isarescu said. He added the volatile capital inflows may lead deviations from the inflation prognosis.

"The leu's nominal appreciation reflected a strengthening in monetary conditions," Isarescu said.

Romania's leu has gained nearly 5% against the euro and over 10% versus the US dollar in the first four months of 2011, as investor sentiment in the region improved.