KUALA LUMPUR: Malaysia's headline and core inflation both eased to 1.9% in June from 2.0% in May, supported by lower retail fuel prices and softer inflation across several core items, according to Bank Negara Malaysia's latest Monthly Highlights report.
“The moderation in headline inflation was largely driven by lower retail fuel inflation, particularly for RON97 and diesel.
“Lower core inflation also contributed to the decline, mainly reflecting base effects from the increase in streaming services inflation in June 2025, alongside lower inflation for jewellery and watches amid softer global gold prices,” the central bank said.
Meanwhile, the Index of Wholesale and Retail Trade (IOWRT) moderated to 3.1% in May from 6.2% in April.
Retail trade growth improved to 4.4% from 3.9%, driven by stronger sales at supermarkets and department stores, as well as higher sales of automotive fuel.
However, this was offset by slower wholesale trade growth and weaker motor vehicle sales.
Credit to the private non-financial sector remained steady at 6.4% in June, supported by sustained growth in outstanding loans and corporate bonds.
Business loan growth continued its upward trend to 7.2% from 7.0% in May, driven mainly by loans to non-SMEs, particularly for working capital purposes.
Outstanding household loan growth eased slightly to 5.3% from 5.5%, reflecting slower growth in personal use loans.
The banking sector's asset quality remained stable, with gross and net impaired loan ratios unchanged at 1.4% and 1.0%, respectively.
Loan loss coverage, including regulatory reserves, stood at a prudent 124.6% of gross impaired loans.
“The banking system continued to record healthy liquid asset buffers with an aggregate Liquidity Coverage Ratio of 149.7% (May 2026: 149.2%),” Bank Negara said.
On financial markets, Bank Negara said global sentiment continued to be influenced by expectations of a possible US Federal Reserve rate hike by the end of 2026, supported by stronger-than-expected US labour market data, elevated inflation and updated economic projections.
Against this backdrop, the ringgit depreciated 2.6% against the US dollar in June, while the nominal effective exchange rate (NEER) fell 1.6%.
The 10-year Malaysian Government Securities yield rose four basis points amid higher net bond issuances, while the FBM KLCI declined 1.1%, weighed by non-resident outflows.
