Inflation in the Kingdom has eased since touching an 18-month high of 6.1 percent in August 2010 as a rise in food costs subsides.

“Available data ... show possible continued domestic inflationary pressures, at moderate rates, during the second quarter of 2011,” SAMA said in a quarterly inflation report published on its website.

Consumer price growth in the Kingdom reached 4.8 percent year-on-year in April, still fueled by high food prices.

“I don’t know what moderate means for them, but I expect average inflation to be 5.7 percent this year,” James Reeve, senior economist at Samba Financial Group in London, said.

“Inflation among trading partners is a contributing factor, which is up a bit and certainly high among emerging market trade partners such as China and Korea.”

Consumer inflation in China eased modestly to 5.3 percent in April from a 32-month high in March of 5.4 percent, but pressures may start to ease in the second half of 2011.

The relative share of China exports to the Kingdom rose to 11.7 percent in 2010 reaching SR46.9 billion ($12.5 billion), from 4.0 percent in 2000, the data also showed.

The central bank also said construction of new housing units following the king’s spending package should contribute to decrease the inflation rate in the medium and long term.

The Kingdom has pledged to spend an estimated $130 billion, or around 30 percent of its annual economic output, on new houses, creating jobs, unemployment benefit and other measures.

Central Bank Governor Muhammad Al-Jasser said in March handouts by Custodian of the Two Holy Mosques King Abdullah were not likely to exacerbate inflation, although analysts challenged this view, saying the package would fuel household consumption.

Analysts see price pressures building up in the next months mostly due to the traditional pressures on food costs during the holy month of Ramadan.

The Kingdom imports around 90 percent of food.

Jasser said in January he was worried that a global rise in food prices may drive up inflation but remained committed to the dollar currency peg.

Saudi Arabia pegs its riyal currency to the US dollar which limits flexibility of its monetary policy to control inflation.

“The dollar has strengthened in the last couple of weeks, but the overall dollar index this year is still down around 5 percent. If the dollar continues on its downward trend, then you would expect imported price pressures,” Reeve said.

A Reuters poll in March showed analysts expected average Saudi inflation of 5.6 percent this year, up from 5.3 percent last year.