KUALA LUMPUR – Malaysia’s inflation outlook for 2026 is expected to stay moderate at between 1.5 per cent and 2.5 per cent, despite global commodity price swings triggered by the West Asia conflict, according to Bank Negara Malaysia (BNM).
In its Economic and Monetary Review 2025 released today, the central bank said a stronger exchange rate could help contain import costs.
“Domestic policy measures will also help mitigate the pass‑through of global cost pressures to domestic prices. In turn, cost pressures faced by firms are expected to remain manageable, with pricing behaviour remaining generally cautious across the retail and services segments,” BNM stated.
BNM projected core inflation to average between 1.8 per cent and 2.3 per cent in 2026, consistent with economic activity remaining in line with potential, without generating significant demand‑driven inflationary pressures.
Upside risks include food and other import‑sensitive sectors, which may face higher costs from elevated global commodity prices. Some producers and retailers could also opportunistically raise prices. On the downside, weaker global demand and softer commodity prices could ease inflationary pressures.
“Exchange rate developments would also have a bearing on imported cost pressures, which could affect inflation outcomes,” the report noted.
BNM emphasised that monetary policy will remain focused on supporting sustainable economic growth while keeping inflation contained.
“Inflation is projected to remain moderate, but upside risks could stem from renewed external cost pressures, while downside risks may arise from softer global growth and more moderate domestic demand conditions,” it cautioned.
Decisions in 2026 will continue to be guided by the Monetary Policy Committee’s (MPC) assessment of risks to Malaysia’s inflation and growth outlook.
BNM expects domestic financial markets to remain broadly favourable, supported by accommodative global financial conditions and Malaysia’s strong fundamentals.
In the bond market, Malaysian Government Securities (MGS) yields are expected to be supported by the global interest rate environment and gradual foreign inflows. Meanwhile, equity market performance is projected to benefit from improving investor confidence and Malaysia’s positive growth prospects.
“Financing conditions will remain supportive in 2026, underpinned by sustained credit growth amid continued economic expansion and conducive borrowing conditions,” BNM added. – March 31, 2026