Annual growth in Saudi money supply, an indicator of future inflation, rose for the first time in three months to 21.8 percent in August from 20.85 per cent in July, the central bank said Sunday. M3, the broadest measure of money circulating the Saudi economy, hit SR885.77 billion at the end of August, compared with SR727.15 a year earlier, the Saudi Arabian Monetary Agency (SAMA) said in a monthly report on its website. Demand deposits, the largest component of M3, recorded a 1.95 per cent month-to-month fall in August, its strongest in at least a year and second monthly drop in a row, to 342.31 billion riyals, which was its lowest level since April of this year. Money supply growth fell last December, a month after the largest Arab economy tightened lending curbs to offset lower interest rates. M3 grew 19.6 percent to SR789.76 last December, SAMA said. Money supply growth was 21.6 percent last November. Saudi Arabia raised bank reserve requirements twice since last November, making banks to keep more money in the vaults. The Saudi central bank raised the reserve ratio to 9 percent from 7 percent last November, and increased it again in January to 10 percent. Still, tightening lending curbs would have only a limited impact on restraining money supply growth, analysts said. Like other Gulf countries, Saudi Arabia is struggling to contain inflation, which recently hit a 30-year peak of 11.1 per cent in August. Slowing food and rent prices have slightly reduced this to 10.9 per cent in July. The central bank's total net foreign assets hit SR1.56 trillion at the end of August compared with SR930.7 a year earlier, SAMA added.
