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 Arab 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 Saudi Arabian Monetary Agency (SAMA) 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.
