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Saudi inflation not set to ease until '09
Saudi Arabia's Central Bank Governor Hamad Saud Al-Sayyari said on Wednesday inflation in the world's top oil exporter could begin declining in the first quarter of 2009, later than previously expected.
Inflation in the kingdom eased from a peak of at least 30 years to 10.9 percent in August, as gains in key components - rent and food prices - steadied in the largest Arab economy, official data showed on Sunday.
"The inflation correction could happen in the first quarter of 2009 instead of the second half of 2008," Al-Sayyari said.
He said a deficit in housing was the key driver for inflation, which may need "two to three years to start declining".
In April, Al-Sayyari said inflation could cross 10 percent this year before possibly easing in the second half of the year.
The Saudi cost of living index was 117.9 points on Aug. 31, according to Central Department of Statistics data carried by state-run Saudi Press Agency. That compared with 106.3 points a year earlier.
Food and beverage prices gained an annual 15.8 percent in August down from 16 percent a month earlier. The rental index, which includes rents, fuel and water, rose an annual 18.5 percent in August down from 19.8 percent in July.
Inflation is a key challenge across the Gulf Arab region, where most states peg their currencies to the dollar, a fact that contributed to inflation as weakness in the US currency drove up import costs.
Saudi Arabia, which has insisted it will keep its riyal's dollar peg, has tried to offset the impact of inflation on its 25 million people by raising public sector wages and boosting subsidies this year.
The kingdom has also taken measures to curb public spending and tightened bank lending curbs to prevent lower borrowing costs from stoking inflation.
Dollar pegs oblige the Gulf Arab states, bar Kuwait, to track US interest rate cuts, including seven in the last year. (Reuters)
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