KUALA LUMPUR (Dec 23): Economists said Malaysia’s benign inflation of 1.4% in November reinforces expectations that Bank Negara Malaysia (BNM) will keep monetary policy unchanged, as price pressures stayed muted despite tax adjustments and fuel price changes.
Research houses broadly expect inflation to average 1.4% in 2025 and rise modestly in 2026, driven by gradual second-round effects from the expanded sales and service tax (SST), higher labour-related costs and migrant worker levy reforms.
Inflation grew below the consensus forecast in November on smaller-than-expected impact from the SST adjustment, while subdued commodity prices translated into fuel rebates for electricity bills.
"Higher SST, labour levies and firm-level cost pressures could lift inflation gradually" in 2026 although below the upper bound of 2% by official forecasts, said Kenanga Research in a note.
Kenanga noted that stable food and transport costs, alongside continued declines in housing and communication charges, were the main anchors keeping inflation subdued.
Apex Securities separately lowered its 2026 inflation growth forecast lower to 1.8% from 2.0% "given the muted policy pass-through from the SST expansion".
"This would keep inflation broadly in line with the five-year historical average of +1.8% (2020-2024) and within the official projection range of 1.3%-2.0%," it said.
While excise duty hikes for alcohol and tobacco lifted prices in that subcategory to 2.4% year-on-year in November, the impact on overall inflation was limited due to its small weight in the consumer price index.
On the policy front, economists agreed that the current inflation backdrop gives BNM room to stay on hold, with the overnight policy rate likely to remain at 2.75%.