A passive crawling peg is a form of crawling peg that involves changing the target band to coincide with the development of current inflation conditions. That contrasts with the active crawling peg, where the central bank sets a target band for the coming weeks.
Under crawling peg, central banks set the range of exchange rates (referred to as bands). They direct the exchange rate to move within the band and review periodically the target band.
This system aims to prevent the appreciation of the real exchange rate. When inflation increases, for example, due to increased wages or money supply, the central bank will devalue the nominal exchange rate.
