Soft Peg
a.k.a. Crawling peg, Managed peg
A loose currency peg where the rate is kept near a target or within a band but allowed to move or be adjusted.
In plain English
A loose currency peg where the rate is kept near a target or within a band but allowed to move or be adjusted.
A soft peg is a peg with some give. Instead of fixing the rate absolutely, the central bank lets the currency move within a band, or nudges the target gradually over time (a crawling peg). It is a middle ground between a hard peg and a free float.
It offers some stability while leaving room to adjust. The weakness is credibility: if markets think the band will be moved, they can pile in and force the issue.
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