Inflationary pressures in Saudi Arabia are worrying but the central bank sees no need to adjust interest rates, its governor Muhammad Al-Jasser said on Sunday.

'At 6.1 percent, the inflationary pressures are worrying ...We are monitoring them,'  Al-Jasser said at the Saudi Arabian Monetary Agency's (Sama) annual news conference.

'The tools we have of course are very much in terms of watching our money supply and what's happening on the fiscal side of our economy'.   

He said this highlighted the importance of ongoing coordination between monetary and fiscal policies. 'It's premature to make projections for the trajectory of inflation. We are closely monitoring these developments (food prices and harvests globally)'    

'It is still too early, within few months the image will get clearer. Ramadan and the surge in demand it causes blurs the picture a bit'.   

He also said the global agricultural output will be critical to the sort of action that would need to be implemented to counter inflation.

Al-Jasser said he did not see a need for an adjustment for now. 'The system has ample liquidity, the reverse repo is at 0.25 percent, and since there are no pressures on the system of liquidity, there has not been a change recently'.

Sama will monitor the system and adjust 'accordingly' should the need arise, he said.

Private sector lending rose 4.9 percent in August, Al-Jasser said: 'This shows that lending is continuing its recovery.'     'The quality of the lending has also improved ... 5 percent is a good growth rate. We are very satisfied with the current increase in lending'         

'Provisions made by Saudi banks are very high ... We tend to be overly conservative when it comes to making provisions ...Based on the data I have, I don't think provisions in the coming years need to be superior to what we saw in 2010 or 2009.'         

When asked on a possible sovereign bond issue, Al-Jasser said: 'It's up to the finance ministry and it issues bonds when there is a deficit, and this is not the case now. I don't think they will need to issue any for now.'         

Asked about the likelihood of a budget deficit in 2010, he said: 'We are optimistic. The budget is likely to reach balance this year.'  - Reuters