At the end of 1924 foreign exchange was much in demand in the Greek market. The National Bank tried to satisfy that demand by increasing the supply of foreign currency, a fact that led to the decrease of its exchange reserves. This tendency continued throughout the financial year 1925-26. In this way the possibility of the National Bank to control monetary circulation based on its exchange reserves was significantly restricted, as well as its ability to maintain the exchange rate to reasonable levels. Besides, the pound rate recorded an upward trend from January 1925, a fact that encouraged speculation. The National Bank issued banknotes in March 1925 using the accounts in British pounds of the Committee for Refugee Settlement as collateral. It acted as if the pounds of the loan had come to the possession and not the safekeeping of the Bank. This artificial reinforcement of the National Bank's covers in foreign exchange brought back the value of the pound in April 1925 to 260 drachmae as against 320. However, this would only be a temporary improvement.
Special legislative decrees made in August and October 1925 restricted the banks' possibility to proceed to uncontrolled buying and selling of foreign currency. Nevertheless, the fall in the value of the drachma persisted. On December 31, 1925 the rate of the pound rose to more than 375 drachmae and circulation reached 5,339,000,000 drachmae against 4,896,000,000 registered in December 1924. The fall in the value of the drachma against the pound topped the increase of circulation. That enfeebled the public's trust in the national currency. Inflation rate increased from 1,414 in 1924 (base year, 1914:100) to 1,633 in 1925. In Athens, the price of bread rose to 7,35 drachmae in 1926 as against 4,36 drachmae in 1924 and milk was sold 8,79 drachmae instead of 6,27. Inflation was accompanied by tightness of funds and the business world asked for a new currency issue, since until then issues were destined for covering the public needs, while creditors were unable to finance the immediate needs of enterprises.