Economists Keep 2026 CPI Forecasts!

 

Economists expect modest upward pressure on inflation through 2026. Their assessment follows the release of Malaysia’s headline consumer price index (CPI) in December on Tuesday (Jan 20), which came in slightly above expectations at 1.6% year-on-year. The December print — marginally above Bloomberg’s survey consensus of 1.4% — reflected higher prices for personal care items, education and selected household expenses. Full-year inflation averaged 1.4% in 2025, easing from 1.8% in 2024, according to the Department of Statistics Malaysia (DOSM). 

Inflation will drift higher in 2026, driven mainly by policy adjustments, stronger demand pressures and selected cost pass-throughs. MBSB Research maintained its 2026 inflation forecast at 1.8%, noting that while inflation remains mild, upward pressure is likely to build from policy changes such as the expanded Sales and Service Tax (SST) and the gradual passthrough of costs from micro, small and medium enterprises (MSMEs). MBSB also anticipates "growing demand-pull inflation on the back of some monetary policy easing previously", although price growth is likely to be moderate across food, non-food, and core categories, with lower crude oil prices helping to contain broader cost increases. A firmer ringgit and falling global food prices should keep imported inflation in check, although second-round effects from tax measures remain a risk.

 

CIMB Treasury & Markets Research said the December increase was driven partly by “one-off” factors, particularly the normalisation of the information and communication (ICT) category after a year of deflation. CIMB economists noted that subscription costs for audio-visual content and streaming services had surged 13.9% y-o-y, contributing significantly to December’s reading, while pressures from insurance — one of 2025’s key inflation drivers — are likely to ease in the second half of 2026 as the base effect fades.

 

Kenanga Research likewise expects inflation risks to "tilt modestly to the upside" in 2026, projecting inflation to average 1.9% through the year, helped by energy subsidies and imported disinflation. Kenanga Research added that the planned introduction of a multi-tier levy for migrant workers this year may “add further cost pressures in labour-intensive sectors”. 

But with Budi95 fuel subsidies and a stronger ringgit, inflation should be “below its 30-year average of 2.3%”. Bank Negara Malaysia is expected to keep the Overnight Policy Rate unchanged at 2.75% for 2026, citing balanced growth-inflation dynamics and the need to preserve policy space amid external uncertainties. 

Inflationary pressures generally affect fixed income salaried employees, pensioners, savers and the B40/M40 groups. The Government will need to look at steps to reduce impact with targeted subsidies or incentives. Many SMEs may also face issues in raising prices if they are beholden to larger corporations or the expert market. 

Overall, 2026 does not bode well with GDP at 3.5-4.0%, inflation at 1.5-2.0%, and exports muted by tariffs and geopolitical risks. Remain cautious and liquid! 

Reference:

Economists keep 2026 CPI forecasts after December surprise uptick, modest increase seen, Emir Zainul / theedgemalaysia.com, 20 Jan 2026