Saudi Arabia's central bank has said that inflation, which hit a 30-year high of 10.6 percent in June, would continue to rise in the third quarter, but at a slower pace.

However the Saudi Arabian Monetary Agency (Sama) also said  annual growth in Saudi money supply, an indicator of future inflation, eased for a second consecutive month in July.

'Expectations indicate a continuing increase in the inflation rate in the third quarter although at a slower pace from the previous period,' Sama said in a note on its website.

The rise of inflation in the third quarter will be slower mainly because of measures the Saudi government has taken to subsidise some staples and also to rising supplies, Sama said.

But a rising pace of government spending coupled with an expected increase in consumer spending will continue to fuel inflationary pressures in the third quarter, Sama noted.

The third quarter will coincide with the start of both the Muslim fasting month of Ramadan and the new school year as well as some religious celebrations, all of which fuel spending.

Housing prices are also expected to at least stabilise if not increase because of a shortage of housing units in the main cities of the kingdom and limited property development resulting from a rise in both the prices of land and construction input costs, it added.

Inflation is a key challenge across the Gulf Arab region, where currencies are pegged to the ailing dollar, as their economies surge on windfall revenues from oil that has been racing to record highs. - Reuters