October 24, 2025
PETALING JAYA – Malaysia’s inflation is expected to remain subdued through the rest of this year and into next year, despite a slight uptick in September, as stable commodity prices, a firmer ringgit, and targeted fuel subsidies continue to anchor consumer prices.
Economists believe the low-inflation environment provides room for sustained policy support of growth without the need for monetary tightening.
Hong Leong Investment Bank Research (HLIB Research) said that the September consumer price index (CPI) reading marked the highest since February, but overall inflationary pressure remained limited.
“Overall inflation remained low compared with last year and upstream cost pressures stayed muted,” the research house said, citing the producer price index contraction of 2.8% year-on-year (y-o-y) in August.
HLIB Research added that global commodity prices were broadly stable, with Brent crude oil prices hovering below US$65 per barrel since Oct 10, while the recent appreciation of the ringgit and lower retail petrol prices under the Budi95 initiative further contributed to benign inflation.
The research house maintained its CPI forecast for this year at 1.5%.
TA Research similarly highlighted the mild inflation backdrop, stating that in the first nine months of this year (9M25), headline inflation averaged 1.4% y-o-y, while core inflation came in slightly higher at 1.9% y-o-y.
“The gap between headline and core inflation suggests that imported cost pressures have eased, while domestic demand stays firm, keeping core inflation slightly elevated,” it said.
It also noted that the impact of the Budi95 fuel subsidy adjustment is expected to be minimal, as 99% of Malaysians are not affected by higher fuel prices.
TA Research maintained its headline CPI forecast at 1.6% for this year, expecting inflation to remain within 1.5% to 2% next year. The research house also sees no change in monetary policy in the near term.
“With growth proving resilient and inflation staying moderate, we expect Bank Negara Malaysia to leave the overnight policy rate unchanged at 2.75% at its final meeting on Nov 5 and 6,” it said, adding that an expansionary budget would help sustain gross domestic product (GDP) growth of 4% or more next year.
Apex Research said the steady inflation trend reflected Malaysia’s success in implementing reforms without triggering price volatility.
“The steady inflation trend underscores Malaysia’s success in manoeuvring key reform measures, including the expanded sales and services tax (SST) as well as electricity and water tariff adjustments, without causing extensive price volatility,” it noted.
The research house expects headline inflation to hover around 1.5% over the remaining months of this year and maintained its full-year forecast at 1.4%.
For next year, it projected inflation at 2%, reflecting extended pass through effects from the SST expansion, minimum-wage adjustments, insurance premium hikes, and utilities tariff reforms, it said.
Data from the Statistics Department showed that Malaysia’s headline inflation rose to 1.5% y-o-y in September, up from 1.3% y-o-y in August, surpassing market expectations of 1.4%, driven by firmer prices in food and beverages, housing, utilities, and transport. Core inflation, according to the government, also edged up to 2.1% y-o-y from 2% in August.