We estimate that inflation averaged 5.4% in 2010. Rises in international food and non-oil commodity prices are likely to drive inflation in 2011, but these prices are expected to decline in 2012 and 2013, leading to a slight decline in Saudi inflation. Housing shortages will support rental price inflation throughout the forecast period. The link between interest rates and inflation is weak (as consumer debt levels are relatively low and are capped by the government), and inflation is contained largely through subsidies. The government plans to remove some utilities subsidies, but the timing is uncertain. There is a risk of a renewed inflationary spike, as in 2008, given the weakness of the policy tools available to contain inflationary pressures. A weakening dollar, and thus Saudi riyal, will add to the risk of imported inflation. These factors suggest that inflation will be higher in 2011-15 (when we expect it to average 5.3%) than it was in 2005-09 (when it averaged 4.4%).