KUALA LUMPUR, Nov 21 — Kenanga Investment Bank Bhd has lowered its 2025 inflation forecast to 1.4 per cent from 1.5 per cent (2024: 1.8 per cent), driven by the deflationary effects of Budi95.
Although the unsubsidised RON95 price was floated in November and nudged higher to RM2.65/litre, deflationary pressure on the transport component is expected to persist.
“The Budi95 scheme continues to dominate actual consumption; households make up 78.0 per cent of RON95 use according to the Finance Ministry’s estimates, and October’s consumer price index (CPI) suggested an even larger share is buying at subsidised price,” it said in a research note today.
The prospect of softer global oil prices over the coming months could also push transport inflation lower.
“Even so, we remain alert to potential second-round effects, particularly higher operating costs for firms not eligible for the Subsidised Petrol Control Scheme and the broader pass-through from the higher Sales and Services Tax rate," Kenanga said.
On policy outlook, inflation remains well-anchored, growth momentum is improving, and domestic demand continues to be the primary driver of the economy.
“With exports recovering and reform progress firming up investment sentiment, the current overnight policy rate (OPR) of 2.75 per cent provides the right balance,” it said.
Kenanga added that without a United States trade policy shock, there is little reason for Bank Negara Malaysia to adjust its stance, as long as household spending and investment intentions hold.
As for 2026, RHB Investment Bank Bhd (RHB IB) said next year’s inflation is expected to rise to 1.8 per cent, up from 2025’s forecast of 1.5, which aligns with the upper bound of the projected official range of 1.3 per cent to 2.0 per cent.
“This reflects our optimistic view of domestic demand, supported by steady investment activity, resilient consumption, and expansionary fiscal measures.
“Despite the modest uptick, inflation remains manageable, remaining below the long-term average of 2.0 per cent, amid orderly policy implementation and the absence of excessive demand pressures,” it said in a note today.
RHB IB noted that softer global commodity prices should help maintain moderate domestic cost conditions.
“Overall, the impact of announced and upcoming policy reforms on inflation is likely to remain contained, supporting a steady monetary policy stance in the coming year,” it said.
Earlier today, the Malaysian Statistics Department (DOSM) reported that October 2025 inflation eased to 1.3 per cent, down from 1.5 per cent in September 2025.
