Understanding Pegged Exchange Rates

Exchange rate regimes are an essential topic in international economics, affecting trade and investment flows between countries. In this context, an exchange rate regime refers to the way a country manages its currency in relation to other currencies, and it plays a pivotal role in influencing a nation’s economic health.

One common type of exchange rate regime is a pegged exchange rate. In a pegged exchange rate system, a country ties its currency's value to that of another major currency, which helps stabilize exchange rates and control inflation.

Considering the characteristics of exchange rate regimes, which of the following describes a primary feature of a pegged exchange rate system?