Research Firms Lower Inflation Forecasts To 1.5-1.8 Pct In 2025

KUALA LUMPUR, July 22 (Bernama) -- Research firms have revised their forecasts for Malaysia’s headline inflation in 2025, lowering it to 1.5 per cent to 1.8 per cent.

MBSB Investment Bank Bhd has adjusted its 2025 inflation projection to 1.8 per cent, considering the sustained moderate inflation reading and weaker cost pressures in recent months as well as the delay in the RON95 subsidy adjustments, which may lead to a more gradual pickup in inflation than initially forecast. 

“We adjust our inflation forecast lower in light of the latest policy developments,” it said.

Citing Communications Minister Datuk Fahmi Fadzil, it said there is a slight delay in the implementation of targeted subsidies for RON95 petrol which stems from the necessity for a comprehensive review and meticulous fine-tuning of the policy mechanism to ensure the rollout will not adversely affect the public.

“Overall, we project that higher price pressures will predominantly be driven by supply-side factors, particularly those arising from the expanded sales and service tax (SST) implementation.

“Complementing this, additional demand-side pressures could also grow following the recent Overnight Policy Rate (OPR) adjustment, which may encourage larger consumer expenditures on the back of resilient labour market conditions, with healthy employment and wage growth,” it added. 

It said that despite the potential rise in demand, MBSB Investment Bank expects the OPR will be kept at 2.75 per cent for the rest of year as overall inflation remains under control.

Meanwhile, OCBC senior ASEAN economist Lavanya Venkateswaran said the outlook for headline consumer price index (CPI) remains relatively subdued for the remainder of the year.

“We are reducing our 2025 CPI forecast to 1.5 per cent year-on-year (y-o-y) from 2.0 per cent previously based on low inflation of 1.4 per cent in the first half of 2025 (1H 2025) and reduced prospects of RON95 rationalisation. 

“We had previously expected 20-25 per cent increase in RON95 prices from October 2025,” she said. 

Besides, she said that with gross domestic product (GDP) growth expected to slow in the second half of 2025 (2H 2025) to 3.5 per cent y-o-y from an estimated 4.4 per cent in 1H 2025 and that inflation will remain low, OCBC sees monetary policy as having room to ease further in 2H 2025.

“We have pencilled in another 25 basis points rate cut from Bank Negara Malaysia for the remainder of the year,” she added. 

Today, the Department of Statistics Malaysia (DoSM) said Malaysia’s inflation rose at a slower pace of 1.1 per cent in June 2025, with the index standing at 134.5 points compared to 133.0 in the same month last year.

DoSM’s June 2025 CPI release stated moderation was also reflected in the Producer Price Index (PPI) for local production, which declined by 3.6 per cent in May 2025.

-- BERNAMA