PETALING JAYA: Inflation is expected to remain manageable in 2026 despite mounting geopolitical risks and elevated energy prices.
This is likely to allow Bank Negara Malaysia (BNM) to keep interest rates unchanged as policymakers balance cost pressures against domestic economic stability.
BIMB Research said it was maintaining its 2026 inflation forecast at 2%, in line with BNM’s projected range of 1.5% to 2.5%, amid expectations that subsidies and regulated pricing mechanisms would continue cushioning households and businesses from external shocks.
“Inflation is expected to stay broadly manageable, supporting a stable macroeconomic environment in 2026,” the research house said.
It added that headline inflation, as measured by a change consumer price index would likely be driven by the gradual pass-through of external cost pressures and supply chain disruption risks, although prolonged geopolitical tensions could increase commodity-related inflation, particularly in food, housing utilities and transport.
“While we maintain our 2026 inflation forecast at 2%, risks remain tilted to the upside despite near-term cushioning from fuel subsidies,” BIMB Research said.
It said Malaysia remained relatively insulated from near-term global energy shocks due to existing policy support measures.
“Malaysia is well placed to absorb near-term shocks, supported by fuel subsidies and regulated gas pricing for electricity generation, which help limit the impact of global energy price increases,” BIMB Research explained.
As such, it expects BNM to keep the overnight policy rate (OPR) unchanged at 2.75%.
Similarly, TA Research and Apex Securities also expect the OPR to remain at 2.75% throughout the year.
TA Research said escalating tensions in the Middle East had significantly increased risks to global oil markets, with Brent crude prices surging above US$100 per barrel since mid-March.
“Supply concerns and market volatility have intensified amid disruption risks surrounding the Strait of Hormuz, a critical chokepoint that accounts for roughly one-fifth of global oil and gas flows,” it said.
“Looking ahead, any de-escalation or resolution of the conflict is unlikely to result in an immediate normalisation of oil prices,” it further noted.
“Instead, Brent crude prices are expected to adjust gradually, as global supply chains, shipping routes, and inventory levels would require time to stabilise and rebuild following the period of heightened geopolitical risk.”
TA Research maintained its base-case assumption for Brent crude to average between US$80 and US$100 per barrel, while forecasting CPI at 2.1% to 2.6%.
Apex Securities likewise retained its 2026 inflation forecast at 2.1%, warning that upside risks could emerge from a potential RON95 fuel price adjustment and persistent supply chain disruptions linked to the Middle East conflict.
“Inflation averaged just 1.7% year-to-date, still below its 10-year average of 1.8%,” the brokerage said, adding that higher energy prices were expected to gradually raise logistics and utility costs.
However, Apex Securities said inflationary pressures would likely remain contained as some businesses continued absorbing higher costs amid competitive pressures and regulatory constraints.
The brokerage also pointed to mitigating factors, including the continuation of RON95 fuel subsidies and targeted diesel subsidies for eligible commercial transport operators, alongside the firmer ringgit.
Data from the Statistics Department showed that Malaysia’s headline inflation accelerated to 1.9% year-on-year in April, compared with 1.7% in March, in line with market consensus, driven mainly by higher transport costs.
Meanwhile, one economist told StarBiz that Malaysia’s inflation outlook remains relatively contained despite rising external uncertainties, supported by existing subsidy mechanisms and still-moderate domestic price pressures.
“While geopolitical tensions and elevated oil prices could contribute to higher cost-push inflation in the coming month, current conditions are still consistent with BNM maintaining a stable interest rate environment,” he said.
