View of the rear Entrance of the Czech National Bank headquarters in Prague
The Czech National Bank (Czech: Česká národní banka, ČNB) is the central bank and financial market supervisor in the Czech Republic with its headquarters in Prague. The Bank's governor is Miroslav Singer. In accordance with its primary objective, the ČNB sets monetary policy, issues banknotes and coins and manages the circulation of currency, the payment system and settlement between banks. It also performs supervision of the banking sector, the capital market, the insurance industry, pension funds, credit unions and electronic money institutions, as well as foreign exchange supervision.
The primary objective of ČNB as stated in the Act on ČNB is price stability. The secondary objective is to support sustainable economic growth. It currently employs inflation targeting monetary transmission mechanism. The goal is to stabilize inflation around 2.0% per annum.
Banks can deposit excess liquidity overnight with the ČNB at the discount rate and can borrow overnight funds at the lombard rate. Thus these two rates create a corridor for the short-term money market rates. Moreover the ČNB conducts open market operations in the form of repurchase agreements (REPOs). The basic duration is 2 weeks. Currently the ČNB is absorbing excess liquidity. The aim of these operations is to influence short-term rates which subsequently affect economic activity, the flow of capital, and inflation.