PETALING JAYA: Inflation is expected to face modest upward pressure in the coming months, although targeted subsidies and subdued demand-driven price pressures should prevent a broad-based acceleration.
With consumer price index (CPI) remaining broadly manageable at around 2%, Bank Negara Malaysia is likely to keep the overnight policy rate (OPR) at 2.75% through 2026.
Phillip Capital Research said inflation risks remain tilted modestly to the upside, citing relatively elevated crude oil prices and resilient domestic economic activity.
Brent crude has recently rebounded to around US$90 a barrel from about US$70 before the escalation in US-Iran geopolitical tensions.
“Persistent geopolitical risks in the Middle East could lead to higher production costs, which may eventually be passed through to consumers.
“Strong domestic economic momentum is likely to generate some demand-driven inflation, particularly as resilient activity in the services sector could keep services inflation elevated,” it said.
“However, easing global food price inflation may provide some buffer for Malaysia’s food inflation,” it added.
Phillip Capital Research maintained its 2026 headline inflation forecast at 1.8%.
TA Research sees some upside risk, with CPI potentially moving back above 2% in the coming months if crude oil prices remain elevated and producer price pressures pass through more strongly. It maintained its 2026 CPI forecast at 2.1%.
“While inflation has remained below our full-year forecast range thus far, we expect some acceleration in the latter part of the year, reflecting the lagged effects of higher energy and producer costs as well as firmer price pressures in several key CPI components,” it explained.
“From a monetary policy perspective, the combination of manageable inflation and resilient domestic economic growth continues to support a prolonged pause in the OPR at 2.75%,” it added.
Hong Leong Investment Bank (HLIB) Research has forecast contained price pressures and maintained its full-year CPI forecast at 2%.
It expects inflation to remain contained through the second half of 2026, supported by the Budi95 and Budi Diesel subsidy schemes.
“Energy price volatility remains a key upside risk to inflation amid the US-Iran stalemate,” HLIB Research pointed out.
Apex Research expects inflation to remain stable, with 2026 and 2027 CPI forecasts pegged at 2%, respectively.
“Existing targeted RON95 and diesel subsidies should continue to keep inflation pressures in check, with the government likely to maintain current measures to cushion households from higher energy prices,” it said.
However, Apex Research highlighted that upside risks to price pressures remain, with several factors potentially driving inflation higher in the second half of the year, including the lagged pass-through of higher business input costs into consumer prices.
Malaysia’s CPI moderated to 1.8% in July 2026, from 1.9% in the preceding month. Year-to-date, CPI averaged 1.8%.
Meanwhile, one analyst noted that with domestic demand still steady and subsidies cushioning households, there is limited scope for inflation to derail the current OPR stance.
“Malaysia’s inflation outlook should remain manageable, although higher energy costs could create pockets of price pressure,” he pointed out.
