PETALING JAYA: Early signs of inflationary pressures are emerging, with headline inflation edging up to 1.7% year-on-year in March from 1.4% in February, as higher fuel and transport costs begin to filter through the economy.
This comes as Brent crude prices have surged amid rising geopolitical tensions in the Middle East, prompting expectations of sustained cost pressures in the near term.
Apex Research, for one, has revised its 2026 inflation forecast upward to 2.1% from 1.8% with upside risks from a potential RON95 price adjustment and broader cost pass-through.
However, measures such as increase in Budi Diesel and Budi Agri-Komoditi subsidies should help mitigate some cost pressures.
It noted that fuel accounted for 5.7% of the Consumer Price Index (CPI) basket and the fixed RON95 price at RM1.99 per litre for eligible Malaysians should continue to anchor inflation and limit broad-based pass-through.
Thus, it said the inflation impact will mainly come from unsubsidised RON97 and diesel.
Based on the research firm’s revised oil price assumption of US$85 per barrel of oil for 2026, from US$65 previously, it estimates a modest 0.2 percentage point increase increase in inflation from higher fuel prices.
Similarly, BIMB Research sees inflation remaining broadly manageable in 2026, projecting headline inflation to average around 2% (versus the Finance Ministry’s estimate of 1.3% to 2%), which is modestly higher than 1.4% in 2025. The firm attributes this to delayed transmission of external cost pressures.
“Malaysia remains relatively well insulated in the near term, supported by fuel subsidies and the regulated gas pricing framework for electricity generation, which limit the immediate pass-through of higher global energy prices to domestic inflation.
“These factors underpin expectations that Bank Negara Malaysia will maintain the overnight policy rate at 2.75%,”said BIMB Research.
An analyst said the overall inflation impact will depend on the duration and severity of geopolitical disruptions.
He said a prolonged stretch of oil prices above US$100 per barrel would increase government spending pressures, while any reduction in subsidies could result in higher energy, transport and food costs.
At the time of writing, Brent crude was trading at around US$96 per barrel amid uncertainty over the Strait of Hormuz and fears of a breakdown in ceasefire talks.
Escalating tensions in the Middle East have pushed Brent crude prices above US$100 per barrel since mid-March, an increase of more than 40% from pre-conflict levels.
Meanwhile, Economy Minister Akmal Nasrullah Mohd Nasir said Malaysia was bracing for a delayed uptick in inflation as the impact of the Iran war filters through to consumer prices later this year.
“The rise in inflation was no longer confined to fuel, as higher raw material costs in construction and manufacturing are also pushing up production costs,” Akmal Nasrullah said in a monthly ministry briefing yesterday, according to Bloomberg.
