Headline inflation rose to 1.6% year-on-year last December against 1.4% in November 2025.
PETALING JAYA: Economists are expecting headline inflation, as measured by the consumer price index (CPI), to be in the manageable range of between 1.5% and 2% for this year.
They also forecast that the overnight policy rate (OPR) would be maintained at the current level of 2.75%.
Headline inflation rose to 1.6% year-on-year (y-o-y) last December against 1.4% in November 2025, which was slightly above consensus of 1.4%. For 2025, inflation averaged 1.4% compared with 1.8% in 2024.
Inflation was driven by higher prices of alcoholic beverages and tobacco, housing, utilities, information and communication as well as personal care.
Core inflation edged up to 2.3% y-o-y in December 2025 against 2.2% in November last year, its highest level since October 2023.
Headline inflation, as measured by the CPI, took into account the whole basket of goods and services produced in a country for a specific period.
Core inflation, on the other hand, excludes items such as food and energy namely petrol due to the volatility of their prices.
TA Research said in 2026, demand-driven inflation is expected to be the main contributor, underpinned by continued government assistance, a firm labour market, rising household incomes and seasonal spending effects from upcoming festive periods such as the Chinese New Year and Hari Raya festivities.
“That said, these pressures are likely to be manageable and transitory rather than broad-based. We expect inflation to remain well contained within the 1.5% to 2% range.
“Importantly, inflation is expected to remain below its long-term historical average, reinforcing the view of a relatively benign price environment.
“Against this backdrop, monetary policy conditions remain supportive, with the OPR maintained at 2.75%, helping to preserve favourable financing conditions while safeguarding overall macroeconomic stability,” it noted.
It said Bank Negara Malaysia’s first policy meeting of 2026 today would be closely watched, particularly for its assessment of the inflation outlook and growth momentum following stronger-than-expected economic performance in the fourth quarter of 2025 (4Q25).
Any policy recalibration is likely to remain data-dependent rather than pre-emptive, the research house said.
An analyst noted that core inflation had continued its gradual ascent and December’s figures marked its highest level since October 2023, signalling a steady buildup in underlying price pressures, reinforcing expectation that domestic demand would anchor growth in 2026 and offset external volatility.
Meanwhile, Hong Leong Investment Bank (HLIB) Research expected the CPI to trend slightly higher to 1.7% this year, driven by low base effect, domestic policy adjustments as well as communication-related inflation.
“Nevertheless, the upward trajectory is anticipated to be mild due to lower RON95 prices, benign global commodity environment, coupled with a strong ringgit.
“Against this backdrop of subdued inflation and solid economic growth, we continue to expect the central bank to keep the OPR at 2.75% through 2026,” it said.
Meanwhile, Apex Research maintained its 2026 inflation forecast at 1.8% y-o-y and the OPR at 2.75%.
The research house added that domestic demand would be underpinned by tourism with Visit Malaysia 2026, tight labour market conditions and ongoing income-related policy support to provide modest support to inflation.
