KUALA LUMPUR (June 19): Malaysia’s inflation is expected to remain stable, supported by contained demand conditions and policy buffers that should limit the pass-through of external cost shocks, economists said on Friday.
The consumer price index, the country’s main gauge of inflation, is expected to remain closely tied to movements in global commodity prices and evolving geopolitical risks, RHB Research said in a note.
Nevertheless, domestic policy settings — particularly the continuation of fuel subsidies — are expected to partially offset external pressures.
Inflationary pressures are also likely to be moderated by behavioural adjustments, as consumers seek to remain within the reduced subsidised quota, as well as the phased implementation of work-from-home arrangements for civil servants, which could further dampen fuel demand, RHB Research said. It maintained its inflation forecast for the year at 2.1%.
Malaysia’s inflation rose 2.0% in May 2026 from a year earlier, marking its fastest pace since July 2024, as food prices continued to gain momentum. However, the reading was lower than the median forecast of 2.1% in a Bloomberg poll of economists. On a seasonally adjusted basis, the index rose 0.1% month-on-month in May.
The threat of broad, supply-driven inflation similar to the Russia-Ukraine war “seems to have passed” following the signing of the memorandum of understanding between the US and Iran to end the war, which has helped stabilise global supply conditions, Pantheon Macroeconomics said.
As a result, the research house expects inflation to continue its downward trajectory, easing to around 1.5% by September before edging up slightly to 1.9% by December.
Upside risks from food and commodity prices
Nevertheless, RHB Research has flagged that food inflation poses a potential upside risk, as weather disruptions linked to El Nino conditions and drought risks could affect crop yields, particularly for key regional commodities such as rice and palm oil.
This, combined with elevated fertiliser and fuel costs, could lift global food prices and gradually feed into domestic inflation, it said.
Meanwhile, BIMB Securities also flagged that prolonged geopolitical tensions continue to pose upside risks to inflation, particularly through commodity channels, with potential increases in food, housing utilities, and transportation costs in the months ahead.
The US–Iran conflict is already showing early spillover effects on global food systems, primarily through elevated energy prices and rising fertiliser costs, it said.
However, the research house, which estimates headline inflation at 2.4%, expects inflation to remain broadly manageable, supporting a stable macroeconomic environment for the remainder of the year.