The National Bank of Romania (NBR), which cut its rate by 350 basis points from July 2013 through May this year, added that the exchange rate of the leu had "posted relatively larger fluctuations, on the back of tensions relative to the situation in Greece and international financial market volatility."
The leu started depreciating against the U.S. dollar in July 2014 before falling to a low of 4.23 in mid-March. Since then it has been largely stable though its exchange rate has been fluctuating. Today the leu was trading at 4.03 to the dollar, down 8 percent this year.
Romania's inflation rate rose to 1.16 percent in May from 0.65 percent in April but the central bank said it still expects inflation to enter and remain in negative territory in the short term as the scope of a reduced VAT rate hits all food items and public food services along with a narrowing of the negative output gap and a rise in unit labour costs.
Last month the NBR forecast inflation of around nil between June and May 2016, before returning to the bank's tolerance rate in the fourth quarter of 2016, as the VAT rate on June 1 was cut to 9 percent from 24 percent on all food items, non-alcoholic beverages and public food services.
The National Bank of Romania issued the following statement: