Crawling Peg

A crawling peg is a fixed exchange rate that is moved in small, regular steps rather than held still. The authorities announce a central value and a rule for adjusting it — commonly to offset an inflation differential against the currency it is anchored to — and then reset the value on that schedule instead of waiting for pressure to force a single large change. The design exists to avoid a specific failure of the static peg. An economy with persistently higher inflation than its anchor sees its fixed rate become steadily more overvalued in real terms, until the arrangement is abandoned in one abrupt move. A crawl spreads that adjustment out over many small ones. Where the rule and its schedule are published, the path of the rate is knowable in advance, which is why such pairs can show long stretches of near-mechanical movement, and why the event that matters is the announcement changing the rule rather than the daily print.