Norway said on Thursday it was prepared spend more of its vast oil wealth. The finance ministry said it would use the informal relaxation of inflation to pump about 4.0 billion crowns ($439.4 million) a year more of Norway's oil wealth into the economy for projects ranging from hospitals to schools.
"The government has today issued a new regulation on monetary policy, with the introduction of an inflation target of 2.5 percent," the central bank said.
The target supplants a formal policy since 1994 of keeping the crown stable against European currencies. But it also relaxes an informal goal of cutting inflation to the European central bank's 2.0 percent limit.
The Norwegian central bank jacked up key interest rates four times in 2000 and the key deposit rate is now 7.0 percent.
Finance Minister Karl Eirik Schjøtt-Pedersen said the shift in policy would give a good basis for continued currency stability and low inflation. Inflation was running at a 10-year high of 3.6 percent a year in February.
The finance ministry also said that it wanted a "moderate" rise in the use of Norway's oil wealth in coming years.
"Petroleum revenues will gradually be phased into the economy, approximately in step with the expected real return of the Petroleum Fund. This implies a moderate increase in the phasing in of petroleum revenues in the years ahead," it said.
Norway's Petroleum Fund, saving surplus oil revenues for future generations, totalled NOK 386 billion ($42.41 billion) at the end of 2000.
Schjøtt-Pedersen said Norway could raise use of oil cash by the equivalent of 0.4 percent of non-oil gross domestic product every year until 2010. That would be the equivalent of about 4.0 billion crowns a year.
The Labour government has been under pressure to raise spending of oil cash in the run-up to elections in September. Many opposition parties want to spend more on welfare at a time of unprecedented wealth.
Norway is the top non-OPEC oil exporter and pumps about 3.2 million barrels per day of oil.