TA Research expects headline CPI to average 1.6% in 2025.
PETALING JAYA: Malaysia’s medium-term inflation path is expected to remain moderate as development spending underpins growth, while targeted subsidy reforms and price adjustments are absorbed with minimal impact on households.
Analysts noted that headline consumer price pressures are likely to stay contained through the rest of 2025, despite adjustments to fuel and utility tariffs.
CIMB Research highlighted that price pressure from the RON95 fuel price adjustment on Sept 30 would likely remain muted.
Following Prime Minister Datuk Seri Anwar Ibrahim’s announcement on Monday, eligible Malaysians will see a reduced RON95 price of RM1.99 per litre, compared with RM2.05 previously, while ineligible consumers will pay RM2.60.
CIMB Research expects the generous monthly quota of 300 litres per consumer to cap any hit to spending.
Still, it said: “Businesses and high-volume consumers could face higher fuel costs due to potential exclusion from the subsidy reform system.”
The research house anticipated a small pass-through, estimating the consumer price index (CPI) could rise by five to 10 basis points in October.
With headline inflation averaging 1.4% year-on-year (y-o-y) in the first eight months, it lowered its full-year forecast to 1.6% from 2%.
TA Research struck a similar tone, stating that upside risks to the inflation trajectory appeared minimal.
The research house noted that the government’s Budi Madani RON95 (Budi95) programme continues to act as a buffer against inflationary spikes, particularly in the transport segment, by lowering household fuel costs and supporting purchasing power for lower- and middle-income groups.
TA Research expected headline CPI to average 1.6% in 2025, edging up slightly to between 1.5% and 2% in 2026.
Crucially, it sees price pressures driven more by demand-pull factors (household spending, a strong labour market, and public sector wage hikes) than cost-push factors (fuel or utility tariffs).
It added that a stable inflation outlook will allow the overnight policy rate to remain accommodative at 2.75% next year.
Maybank Investment Bank Research (Maybank IB) also maintained its 2025 forecast, stating: “With eight-month 2025 average inflation rate of just 1.4%, we maintain the full-year 2025 inflation forecast at 1.5% (2024: 1.8%).”
It pointed to limited upside risk from three key areas: the targeted RON95 subsidy rollout, new water tariffs in Peninsular Malaysia and Labuan, and the upcoming Employees Provident Fund contribution for foreign workers.
While acknowledging that water prices have already lifted the relevant CPI sub-index to 2.7% y-o-y in August, Maybank IB stressed that its weight in the CPI basket is small at 0.9%.
BIMB Research observed that Malaysia’s inflation edged up to 1.3% in August, in line with expectations, while core inflation rose to 2%, pointing to a mild pickup in underlying price pressures.
It noted that subdued producer prices signalled limited upstream pass-through, though a rebound in agricultural costs could revive food-related pressures later this year.
“The upcoming Budi95 programme, set to launch on Sept 30, will reduce fuel prices from RM2.05 to RM1.99 per litre.
“This adjustment should temporarily ease household and transport expenses, given that RON95 carries a 5.5% weight in the CPI basket,” it added.
BIMB Research cut its 2025 inflation forecast to 1.5% from 2%, citing muted cost conditions and delayed subsidy adjustments.
The Statistics Department on Tuesday reported that August inflation stood at 1.3%, while core inflation reached 2%.
Food, restaurants, and financial services led the increase, though transport inflation eased on cheaper RON97 and diesel.
Analysts agree that, barring global commodity shocks or sharp subsidy cuts, Malaysia’s inflation will remain within a benign range, balancing fiscal reforms with growth-friendly policies.
