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Saudi cbank sees inflation easing in Q4

Riyadh, November 22, 2010

Saudi Arabia's high rate of inflation may ease further in the final quarter of 2010, the central bank of the world's top oil exporting nation said on Monday.

Inflation in the biggest Arab economy has shot up beyond analysts' expectations this year, driven by soaring food and housing costs -- factors out of the central bank's reach.

It has eased since touching an 18-month high of 6.1 percent in August, but at 5.8 percent in October remains highest among the Gulf oil producers.

"The data shows that there is a possibility of continued domestic inflationary pressure in the fourth quarter of 2010, but it will be at a lower level than in the previous two quarters," the central bank said in its quarterly inflation report.   

The central bank said it expected housing price pressures to decrease as additional supply enters the market.   

The kingdom's toolbox for tackling inflation is limited by its currency peg to the US dollar, with fiscal policy its main tool for steering the economy.

Analysts polled by Reuters expect average inflation of 5.3 percent this year and 5.1 percent in 2011, still well below a record high of 11.1 percent in July 2008.

Economists believe that inflation will climb going into next year with the weak dollar adding pressure, while budget spending will overshoot the government's target.

Saudi Arabia's economy is seen expanding 3.8 percent this year following a mere 0.6 percent expansion in 2009. - Reuters




Tags: Central Bank | inflation | Saudi | rate |

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