Real exchange rate appreciation is not caused by oil production per se, rather it is determined by the magnitude of additional domestic spending which revenues from oil production make possible. The key to avoiding damaging real exchange rate appreciation when oil starts to be produced in commercial quantities is the careful management of the public spending out of oil revenues.
While the quantitative definition of price stability was instrumental in establishing credibility in the first decade, its asymmetric formulation may have led to misperceptions in a low-inflation environment. Thus we made clear that our policy aim was fully symmetric,11 and it was symmetric around the level that we had established in 2003: below, but close to, 2%.