PETALING JAYA: Malaysia’s disinflation trend extended into February, though analysts warned that energy-related risks stemming from the Middle East conflict could reignite price pressures in the months ahead.
The Statistics Department reported yesterday that headline inflation eased to a three-month low of 1.4% year-on-year in February, driven largely by base effects.
This undershot the consensus estimate of 1.6%.
Despite the softer annual reading, prices rose 0.22% month-on-month as housing and miscellaneous expenses continued to climb. Core inflation fell to a six-month low of 2%.
In a note, Kenanga Research said the country’s energy subsidies and a stronger ringgit continue to anchor prices.
“But the Middle East conflict has prompted us to raise our 2026 inflation forecast to 2.1% from 1.9% (2025: 1.4%).”
The research house explained that Malaysia remains more resilient than many regional peers.
Its status as a net energy exporter provides a fiscal buffer through higher Petroliam Nasional Bhd or PETRONAS dividends and export revenues.
However, global commodity shocks will still pass through via cost-push inflation.
Disruptions in the Strait of Hormuz threaten not only oil flows but also fertiliser supplies, both critical for agriculture.
Higher input costs are likely to lift prices for staples such as rice, poultry and vegetables. While fiscal transfers continue to support demand, rising transport and farming costs will erode affordability.
“If producers pass on these costs to consumers, private consumption, Malaysia’s main growth engine, may soften,” stated Kenanga Research.
In view of this, the research house said Bank Negara Malaysia (BNM) is likely to keep the overnight policy rate at 2.75%.
“Energy export revenues provide near-term breathing space, but the central bank faces a tougher trade-off as inflation pressures rise while global growth moderates.
“BNM must balance containing inflation expectations with preserving domestic activity. We expect the central bank to tolerate moderately higher headline inflation to safeguard growth, while a firmer ringgit helps cushion imported cost pressures.
“In this environment, the policy rate will act mainly as a stabiliser against external volatility.”
The Statistics Department’s data showed that about 59.7% of the 573 items in the consumer price index basket recorded price increases.
Nonetheless, out of this total, 97.4% registered an increase of less than or equal to 10%, while only nine items recorded increases of more than 10% in February 2026.
The remaining 190 items (33.2%) showed a decline, and 41 items remained unchanged.
