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Saudi central bank "not worried" about inflation

JEDDAH, Saudi Arabia (Reuters) - Saudi Arabia's inflation levels are not worrying and will continue to decline, the country's central bank governor Muhammad Al-Jasser said on Saturday.

"Inflation levels are not worrying. Inflation has become stable since the beginning of the year between around 4.6 and 4.9 (percent)... I expect it to continue its decline," Al-Jasser told reporters on the sidelines of a conference in Riyadh.

Analysts polled by Reuters in June expected average inflation in the country to reach 5.6 percent in 2011.

Al-Jasser also said that lending levels had risen by more than 9 percent in 2011. "In reality, lending has risen by more than 9 percent this year ... an excellent level," he said.

Asked about his expectations for lending in 2012, he said: "I expect it to be good."

Fears of debt contagion in the euro zone have been shaking global markets over the past few months but Al-Jasser said Saudi Arabia is protected to a great extend from the European debt crisis.

"We are not affected by what is happening in Europe. Our lending and deposits are internal... We have, to a great extent, protection from these developments but we are not in an isolated island," he said.

Saudi Arabia invests heavily in U.S. treasuries.

(Reporting by Ibrahim al-Mutawa; writing by Asma Alsharif)

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