PETALING JAYA: The inflation trend going forward is expected to be fairly benign, economists say.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid pointed out that RON 95 fuel subsidised at the price of RM1.99 per litre has resulted in savings for the government and is likely to be maintained.
The appreciation of the ringgit will provide room for businesses to keep prices stagnant, particularly those that import raw materials from overseas.
“In the absence of new taxes and adjustments to administered prices, inflation should be fairly stable this year,” he told StarBiz yesterday.
The Statistics Department announced the country’s inflation had increased 1.6% in January compared to the same month last year.
The increase in the consumer price index (CPI) was in line with market expectations.
The monthly headline inflation in January 2026 registered an increase of 0.1% as compared to 0.3% in December 2025.
The Statistics Department said the increase was on the back of four main groups – personal care, social protection and miscellaneous goods and services; education; housing, water, electricity, gas and other fuels; and recreation, sport and culture.
Nevertheless, this was offset by slower increases in insurance and financial services, restaurant and accommodation services, health, information and communication and furnishings, household equipment and routine household maintenance.
The clothing and footwear group showed no inflation as compared to a 0.1% increase in December 2025, while transport posted a decline of 0.7% in January compared to a 0.1% increase in December.
Mohd Afzanizam however cautioned that there are pockets of areas whereby inflation is advancing quite significantly.
“For instance, water supply and sewage collection – it was due for a tariff adjustment which does not occur frequently.
“Then, under the personal care sub-index, the jewellery and watches sustained a double-digit pace since June 2023.
“It is currently at 36.7%, associated with the rise in gold prices,” he said.
Health insurance also edged up at a double-digit pace since July 2025.
“It was 14.2% in January 2026,” said Mohd Afzanizam.
He explained that these were the reasons why core inflation was sustained at 2.3%.
As to whether inflation is being driven by domestic demands or external pressures, Mohd Afzanizam said it is a little bit of both.
“Policies such as subsidies and price control also helped to contain the rise in prices for certain products, but they did not stop the general trend.
“Our forecast is CPI inflation of 1.8% for 2026.”
Meanwhile, Kenanga Investment Bank Bhd
economist Afiq Asyraf Syazwan Abd Rahim said over the next three to six months, he expects the CPI to hold steady, though the high share of price increases in services and non-durables points to a “sticky” floor.
He noted that at 1.6%, headline inflation remains firmly within a low and stable range.
“Base effects will normalise, and the sales and service tax expansion may lift selected components, but the ringgit’s relative strength should continue to buffer imported costs,” he said.
“In short, barring a commodity shock, inflation should remain manageable, likely plateauing rather than declining.”
According to Afiq Asyraf, price pressures are broad and will remain so.
He noted 355 out of 573 items recorded increases, while 78% of services are still seeing price hikes, indicating that domestic costs are still filtering through the economy.
“This momentum suggests core inflation is proving more resilient than expected and is unlikely to decelerate sharply in the near term.
“That said, without a wage-price spiral, a meaningful acceleration in core inflation appears unlikely, but the current breadth ensures it won’t disappear overnight,” Afiq Asyraf opined.
On factors driving inflation, he said the impulse is increasingly domestic and service-driven.
“Semi-durables are seeing more price declines than rises, likely reflecting imported disinflation and a stronger ringgit.
“In contrast, services and non-durables remain the primary drivers of price hikes.
“This reinforces our view that 2026 inflation will stay below its long-term average, reflecting a cost-managed environment rather than one fuelled by an overheating global supply chain.”
