Malaysia’s 2026 Inflation Forecast: Central Bank Sees Stable Prices
Bank Negara Malaysia (BNM) has projected the country’s headline inflation rate to average 2.5% in 2026, according to its latest monetary policy statement released on March 6, 2025. The forecast reflects expectations of stable global commodity prices and contained domestic demand pressures, though risks remain from potential subsidy rationalization and external trade disruptions.
What happened
BNM’s 2026 inflation outlook of 2.5% is unchanged from its 2025 estimate of 2.0-3.5%, with the midpoint aligning with the central bank’s comfort zone. The projection assumes Brent crude oil prices averaging $75 per barrel and no major supply shocks. Core inflation, which excludes volatile food and energy items, is expected to moderate to 2.2% in 2026 from an estimated 2.5% in 2025, as cost pass-through effects from earlier policy adjustments fade. The forecast comes amid BNM’s decision to hold the overnight policy rate at 3.00% for the eighth consecutive meeting, signaling confidence in the inflation trajectory.
Why it matters
For Malaysian businesses and consumers, the 2.5% forecast signals continued price stability, supporting household purchasing power and corporate planning. However, the projection hinges on the government’s ability to implement targeted fuel subsidy reforms without triggering broader price spikes. A sharper-than-expected rise in global food prices or supply chain disruptions from geopolitical tensions—such as renewed trade friction between the US and China—could push inflation above the forecast. The central bank’s steady rate stance also suggests borrowing costs will remain elevated, impacting mortgage and business loan affordability through 2026.
What's next
BNM will update its 2026 inflation forecast in its next monetary policy report due in July 2025. Analysts will watch for clarity on the government’s subsidy rationalization timeline, particularly for RON95 petrol, which could add 0.3-0.5 percentage points to inflation if implemented. The central bank has signaled readiness to adjust policy if inflation deviates significantly from the baseline, but current data supports a prolonged hold on interest rates.
