KUALA LUMPUR: Malaysia’s inflation ticked higher in March 2026, driven largely by rising fuel prices, while wholesale and retail trade growth moderated amid weaker vehicle sales, according to the monthly highlights from Bank Negara.
Headline inflation rose to 1.7% year-on-year in March from 1.4% in February, while core inflation increased to 2.1% from 2.0%.
The uptick was mainly attributed to higher retail fuel prices in line with elevated global oil prices.
However, the overall impact was cushioned by targeted subsidies, with RON95 petrol maintained at RM1.99 per litre under the BUDI95 programme, and subsidised diesel prices continuing at RM2.15 per litre in Sabah and Sarawak.
Bank Negara noted that lower prices for fresh food items, particularly seafood and meat, partially offset the increase in fuel costs.
The Index of Wholesale and Retail Trade (IOWRT) expanded by 4.4% in February, easing from 5.8% in January.
“Growth in the wholesale and retail segment improved. This was mainly driven by the wholesale of food, beverages, tobacco, and household goods; as well as retail trade in non- specialised stores and retail sale of other household equipment in specialised stores, respectively,” Bank Negara said in the highlights.
This was, however, more than offset by a contraction in the motor vehicles segment, reflecting lower car sales alongside weaker motorcycle sales, maintenance and repair activity.
Credit conditions remained stable, with total credit to the private non-financial sector expanding by 5.6% in March, unchanged from the previous month.
The growth was supported by stronger business loan expansion, which rose to 5.8% from 4.6% in February, particularly among non-SMEs for working capital purposes.
“Household loan growth was sustained at 5.4% from February’s 5.5% amid steady loan growth across most purposes,” it said.
Meanwhile, corporate bond growth moderated to 5.8% from 7.4%, due to lower bond issuances compared with the same period last year.
Malaysia’s banking system continued to demonstrate resilience, with asset quality remaining sound.
Gross impaired loans stood at 1.4%, while net impaired loans were stable at 1.0%. Loan loss coverage remained prudent at 125% of gross impaired loans, indicating sufficient buffers against potential risks.
On the external front, financial markets were affected by heightened geopolitical tensions stemming from the escalation of the West Asia conflict, which dampened global investor sentiment.
The ringgit weakened by 3.8% against the US dollar in March, broadly in line with regional currencies, amid a stronger greenback driven by risk-off sentiment.
Meanwhile, the 10-year Malaysian Government Securities (MGS) yield rose by 15 basis points, reflecting higher global inflation expectations.
Equities also came under pressure, with the FBM KLCI declining by 1.5% during the month as investors turned cautious.
Despite external headwinds, Malaysia’s financial system remained well-buffered. The banking sector’s Liquidity Coverage Ratio stood at 144.6% in March, comfortably above regulatory requirements, providing a strong cushion against potential liquidity shocks.
