KUALA LUMPUR (April 17): Inflation in Malaysia is expected to pick up in the coming months after a spike in March, as price pressures from the Middle East crisis percolate through the economy.
With the Middle East conflict still unfolding, the rise in consumer prices in March would merely be a start before a broader first-round impact, according to UOB, Kenanga Investment Bank and RHB Research. Still, all three research houses expect Malaysia to stand pat on the policy rate this year.
While fuel subsidies and an appreciating ringgit “should help cap sharper increases, cost pass‑through and second‑round effects remain key risks,” UOB said.
Data out on Friday showed the consumer price index, the country’s main gauge of inflation, rising 1.7% in March compared to the same month in 2025. The print is higher than the median estimate of 1.5% in a Bloomberg survey and February’s 1.4% year-on-year rise.
While the average consumers are protected from shocks thanks to a system of subsidies and price control, industries most exposed to first-round cost pressures — aviation, logistics, postal services and rubber products — have already announced price increases of up to 50% beginning March.
“In the coming months, cost-push pressures warrant close monitoring, as higher oil prices could feed through to logistics, utilities and broader production costs, with potential spillovers to consumer prices,” RHB Research said.
Over the longer term, producer prices and domestic cost pressures have a “strong and statistically significant influence” on consumer inflation rather than oil prices alone, the research house noted.
While off highs, prices of oil remain elevated amid a fragile truce between the US and Iran. The US Navy is now blockading the Strait of Hormuz critical for shipping one-fifth of the world’s oil and gas supply.
Brent, the global futures benchmark for crude oil, is trading at US$98.50 per barrel and nearly 32% higher than the end of 2025.
For Kenanga Investment Bank, the supply disruption of the Strait of Hormuz exposed structural vulnerabilities in Malaysia’s imports, affecting the majority of imported crude feedstock and key fertiliser inputs.
“This raises food security concerns beyond the cyclical price outlook,” the research house said. “Higher energy and fertiliser costs lift upstream production costs, which then feed through into staples such as rice, poultry and vegetables.”