Malaysia’s inflation outlook is expected to face modest upward pressure in the coming months, though targeted subsidies and subdued demand should prevent a broad-based surge.
With the consumer price index (CPI) averaging 1.8% year-to-date and July’s reading at 1.8%, analysts believe inflation will remain manageable. Bank Negara Malaysia is likely to keep the overnight policy rate (OPR) steady at 2.75% through 2026.
HLIB Says Subsidies Keep Inflation Contained
Phillip Capital Research noted upside risks from elevated crude oil prices, now rebounding to around USD 90 per barrel amid US-Iran tensions, and resilient domestic activity, particularly in services. However, easing global food prices may cushion Malaysia’s food inflation.
TA Research sees CPI potentially rising above 2% later this year due to lagged energy and producer costs, while Hong Leong Investment Bank expects subsidies under Budi95 and Budi Diesel to contain pressures.
Apex Research forecasts CPI at 2% for 2026 and 2027, stressing that targeted fuel subsidies remain critical in shielding households.
Overall, analysts agree inflation risks are tilted slightly upward, but subsidies and steady demand should keep CPI contained.
This balance supports Bank Negara’s prolonged pause in monetary policy, even as energy volatility and geopolitical risks remain key concerns.
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