Malaysia’s 2026 Inflation Forecast Remains at 2.1% Despite Softer June CPI

KUALA LUMPUR, July 2026 – Economists are keeping Malaysia’s headline inflation forecast for 2026 at 2.1%, despite the country recording a slightly lower-than-expected consumer price increase in June.

Malaysia’s consumer price index rose 1.9% year-on-year in June 2026, easing from the 2.0% increase recorded in May. The figure was also below the internal forecasts of RHB Research and Kenanga Research, as well as the market consensus estimate of 2.0%.

The softer inflation reading was mainly attributed to a smaller increase in transport costs as lower fuel prices helped reduce price pressures within the sector. However, food and utility costs continued to edge higher during the month.

RHB Research maintained its full-year headline inflation forecast at 2.1%, compared with year-to-date inflation of 1.7%. Malaysia’s annual inflation rate stood at 1.4% in 2025.

The research house said recent economic data showed a broad-based rise in producer prices across major sectors, suggesting that cost pressures at the production level were gradually increasing.

Such pressures may eventually be passed on to consumers through higher retail prices, although the impact is expected to remain gradual due to stable domestic demand and existing policy measures.

External risks also remain a key concern. Renewed tensions between the United States and Iran, together with the possibility of disruptions in the Strait of Hormuz, could place upward pressure on global crude oil prices.

The Strait of Hormuz is an important route for international energy shipments. Any prolonged disruption could increase oil, transport, freight and production costs, potentially affecting inflation across multiple sectors.

RHB Research said domestic policies, stable demand conditions and the gradual transfer of higher production costs to consumers should help keep both headline and core inflation manageable.

Kenanga Research also retained its 2026 inflation projection at 2.1%, noting that the recent easing in geopolitical tensions may provide only temporary relief to energy markets. And identified weather-related disruptions as another possible source of inflation. A stronger El Niño weather pattern could affect agricultural production and contribute to higher global food prices.

The research firm warned that inflation risks remain tilted to the upside due to the possibility of renewed conflict, supply disruptions and prolonged tightness in global energy markets.

A sustained escalation could lead to higher energy and freight expenses, which may eventually spill over into transport and food prices. Businesses facing more expensive logistics and production inputs may gradually transfer some of those costs to consumers.

Domestically, inflation is expected to remain relatively manageable due to targeted subsidy programmes such as Budi95 and BudiDiesel. These measures continue to protect most households from immediate changes in fuel prices.

However, targeted subsidies may not fully prevent indirect inflation if global energy disruptions continue for an extended period. Higher fuel and shipping costs could still increase expenses throughout the supply chain, particularly for food producers, distributors and retailers.

Despite these uncertainties, the current inflation environment remains moderate. The June CPI reading suggests that price growth is still under control, while domestic policy support continues to limit the immediate impact of external volatility on Malaysian households.

Nevertheless, economists are expected to continue monitoring global oil prices, geopolitical developments, producer-price trends and food-supply conditions. Any significant deterioration in these areas could increase the likelihood of inflation rising above current expectations.

For now, the 2.1% forecast indicates that economists expect Malaysia’s inflation to remain contained throughout 2026, although external risks may continue to create uncertainty for consumers, businesses and policymakers.