Malaysia’s CPI Inflation At 1.7 Pct Remains Contained And Temporary -- Economist

By K. Naveen Prabu

KUALA LUMPUR, April 17 (Bernama) -- Malaysia’s consumer price index (CPI), which edged up 1.7 per cent in March 2026, remains contained and temporary in nature, with the increase largely driven by external cost factors rather than broad-based domestic demand, an economist said.

The Department of Statistics Malaysia (DOSM) released data today showing that Malaysia’s inflation rose 1.7 per cent in March 2026, with the index increasing to 136.4 from 134.1 in the same month last year.

IPPFA Sdn Bhd investment strategy director and country economist Mohd Sedek Jantan said the latest inflation reading reflects early signs of upward pressure, but these remain limited and transitory.

“The recent firming is largely driven by spillovers from the ongoing West Asia conflict through higher fuel and logistics costs, rather than any meaningful shift in domestic demand conditions.

“Importantly, the inflation impulse remains narrow, led by transport and selected services, while core consumption stays stable, reflecting steady demand and limited cost pass-through,” he told Bernama.

Mohd Sedek explained that this situation reflects a typical oil-driven shock, where prices adjust upwards in the short term but do not evolve into sustained inflation without second-round effects.

“As such, while inflation momentum is tilting mildly higher, the underlying structure continues to point to a low-volatility environment with temporary external pressures, rather than the emergence of a persistent or systemic inflation regime,” he said. 

When asked if inflation will stay within the current range, Mohd Sedek said it is likely to remain stable in the near term but could edge higher depending on how much cost is passed to consumers.

“For now, transmission remains partial, with firms absorbing part of the increase in energy and logistics costs stemming from the West Asia conflict, while domestic policy support, particularly the price control on RON95 petrol under the BUDI MADANI RON95 (BUDI95), continues to anchor fuel-related inflation and dampen broader spillovers,” he said. 

Mohd Sedek added that the key turning point lies in second-round effects, where inflation could rise further if higher input costs persist, and firms, in turn, begin passing them on through price increases, especially in services.

“Otherwise, with demand conditions remaining stable and policy buffers intact, cost pass-through is expected to stay contained, keeping inflation within a low and manageable range,” he said.

Mohd Sedek added that the key risks to Malaysia’s inflation outlook for the rest of 2026 are centred on persistent external cost shocks and policy adjustments.

Meanwhile, Prof Emeritus Barjoyai Bardai of Malaysia University of Science and Technology said that while inflation remains within a manageable range, there are emerging signs that price pressures are beginning to broaden.

Barjoyai said inflation is likely to remain within the 1.0 to 2.0 per cent range in the near term but warned that risks are tilted to the upside, especially if cost pressures are increasingly passed on to consumers.

“Inflation should remain manageable in the near term, but external risks such as oil prices and supply disruptions could push it higher. Monetary policy still has room to remain supportive, but vigilance is clearly warranted,” he said. 

RHB Investment Bank Bhd has maintained Malaysia’s 2026 inflation forecast at 1.8 per cent despite the slight uptick in March. 

“We maintain our 2026 headline inflation forecast at 1.8 per cent, while remaining mindful of potential cost-push pressures,” it said in a note today.

The investment bank said the US-Iran conflict was pushing global oil prices higher, which could feed into domestic inflation if sustained.

“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,” it said.

-- BERNAMA