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Discuss this article (0 Comments)Saudi inflation fears mount
by Daliah Merzaban on Sunday, 11 November 2007
Growth in Saudi money supply, an indicator of future inflation, accelerated to 19.4 percent in September, up slightly from the month earlier, paced by investments in time and savings deposits.
M3, the broadest measure of money circulating in the Saudi economy, rose to 744.13 billion riyals ($198.4 billion) at the end of September, compared with 623.46 billion a year earlier, the Saudi Arabian Monetary Agency said on its Web site.
M3 grew 18.8 percent in August and 21.5 percent in July, the fastest annual increase since Nov. 2004.
Saudi inflation climbed to its highest in at least a decade, 4.89 percent, in September, as rent and food costs in the world's biggest oil exporter jumped.
Time and saving deposits grew 24.7 percent in September to 264.47 billion riyals, while demand deposits grew 23 percent to 284.81 billion riyals.
The central bank is constrained in its fight against inflation by the riyal's dollar peg, which forces it to track U.S. monetary policy at a time when the Federal Reserve is cutting rates and the U.S. currency is tumbling to record lows.
The central bank's foreign assets stood at 969.20 billion riyals at the end of September, compared with 771.43 billion in September 2006.
Saudi Arabia this month raised the reserve requirement for banks to 9 percent from 7 percent for the first time in 27 years to prevent lower borrowing costs from fuelling inflation.
Last month, King Abdullah summoned officials to explain rising prices and a committee of his advisors called for a national wage hike.
(Reuters)
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