That increases the money supply , lowers interest rates , and increases aggregate demand. It boosts growth as measured by gross domestic product . It lowers the value of the currency, thereby decreasing the exchange rate. It is the opposite of contractionary monetary policy. To counter risks of further currency depreciation, which might endanger financial stability and increase inflation, the National Bank of Hungary (NBH) has not lowered policy rates since January 2009, despite the deepening recession and contractionary fiscal policy. In the projections, the Bank is assumed to lower its policy rate only in 2010, when financial stability and inflation concerns subside. Definition of 'Contractionary Policy'. Definition: A contractionary policy is a kind of policy which lays emphasis on reduction in the level of money supply for a lesser spending and investment thereafter so as to slow down an economy. Description: A nation's central bank uses monetary policy tools such as CRR, SLR, repo, reverse repo,