The seasonally-adjusted monetary base, which measures the liquidity supplied directly to the economy by the National Bank, registered a much stronger expansion. This increase is mainly attributable to the massive rise in banknote circulation, which was influenced by special factors such as the forthcoming introduction of euro banknotes and coins. The second component of the monetary base, the banks’ sight deposits at the National Bank, also rose while experiencing heavy fluctuations. These fluctuations were most likely triggered by the interaction between the markets’ interest rate expectations and the National Bank’s efforts to keep the three-month Libor rate near the middle of the interest rate target range.
