Historically the Saudi inflation rate has been quite low in the period 2000 - 2006, within a range of 1% - 2%. The central Saudi bank is pegging the Saudi Riyal to dollar. When the Federal Reserve is cutting rates and US currency is tumbling to record lows, the Saudi Bank is forced to lower interest rates fueling inflation.
Credits to the Saudi private sector, encouraged by low interest rates, are soaring. The Saudi Government pours billions in new economic cities. The Saudi budget surplus stands at all times high - 13% in 2008, a result of high energy prices. All signs of overheated economy are in place.
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