Annual inflation in Saudi Arabia accelerated to 4.4 percent in August, its highest in at least seven years, as rents and food costs surged, data from the Central Department of Statistics showed on Wednesday.

Inflation in the world's largest oil exporter hit 3.83 percent in July, triggering calls from the Shura Council, which advises the government, to curb rising prices.

The increase in August was driven mainly by rents which surged 12.1 percent, and the food and beverage component of the index, which rose 6.6 percent, the department said in a report on its Web site.

Inflation has not been this high since it reached 4.98 percent at the end of 1995, according to the department's data for the consumer price index at the end of each year. The department's monthly figures only go as far back as 1999.

"Prices will continue to rise over the following three months and in 2008. The local economy is not yet adjusted to the supply bottlenecks that we see and high demand building up because of economic growth" said John Sfakianakis, chief economist for SABB bank, HSBC's Saudi affiliate.

Saudi central bank governor Hamad Saud al-Sayyari said last week he was concerned by the acceleration in inflation which he attributed to rising rents and higher prices of some imported commodities.

Sayyari said last month he would not match a US Federal Reserve interest rate cut, triggering market speculation that Saudi Arabia could revalue the riyal currency, or drop its peg to the dollar, which hit record lows against the euro this week.

Saudi Arabia's Shura Council, which advises the government on draft laws, urged the authorities last month to tackle inflation and asked the finance minister to appear before it to discuss the problem. - Reuters