Malaysia’s Inflation Expected To Stay Mild In 2025

Samuel Chua

23rd October 2025 - 3 min read

Malaysia’s inflation is expected to remain low and stable in 2025, with experts saying that the effects of petrol subsidy changes and the broader Sales and Service Tax (SST) expansion will likely be limited.

With price pressures contained and the economy showing steady growth, analysts expect Bank Negara Malaysia (BNM) to keep the Overnight Policy Rate (OPR) unchanged at 2.75% for the rest of the year.

Prices Remain Stable

Malaysia’s consumer price index (CPI), which measures inflation, rose 1.5% year-on-year in September 2025, slightly higher than August’s 1.3%. According to UOB Global Economics & Markets Research, inflation has averaged 1.4% so far this year and is expected to stay around that level for the full year.

UOB also predicts inflation to average 1.4% in 2025 and 2% in 2026, which matches the Ministry of Finance’s forecast of 1% to 2% for next year. The research house said Malaysia’s economy remains stable, helped by an expansionary budget aimed at supporting GDP growth of at least 4% in 2026.

Small Impact From Subsidy Changes

CIMB Treasury and Markets Research expects inflation to stay at 1.5% in 2025 and increase slightly to 2% in 2026. It noted that the new Budi95 fuel subsidy programme, which started this year, is unlikely to have a big impact on prices since 99% of Malaysians are not affected by higher fuel costs.

Similarly, RHB Investment Bank has revised its inflation forecast slightly lower to 1.5% from 1.6%, citing weaker transport inflation following lower RON95 petrol prices. Transport costs make up 5.5% of Malaysia’s CPI basket.

Meanwhile, Pantheon Macroeconomics expects inflation to stay at 1.4% in 2025, before easing to 1.2% in 2026 and 1.1% in 2027, helped by lower global oil prices and stable demand.

Room For Policy Flexibility

Economists believe Malaysia’s inflation outlook remains healthy, with both supply and demand pressures under control. UOB said price changes after the subsidy rationalisation have been moderate, while the job market remains strong but manageable.

If global demand weakens further, BNM may have room to ease monetary policy in 2026 to support growth.

Malaysians Still Feel The Cost Of Living Strain

According to our 2025 RinggitPlus Malaysian Financial Literacy Survey, many Malaysians continue to feel the pinch despite low inflation. The survey found that 55% of Malaysians live paycheck to paycheck, and 39% say they could only survive three months or less on savings if they lost their job.

Middle-income earners, especially those earning between RM5,000 and RM10,000, are the most affected. Fewer people in this group are saving more than RM1,000 a month, and more are saving less than RM500 compared with the previous year.

These findings suggest that while inflation numbers look stable, household budgets remain tight, with many Malaysians cutting back on eating out, leisure, and other non-essential spending.

Looking Ahead To 2026

Experts expect Malaysia’s inflation to average around 2% in 2026, which is still considered low. With steady prices, moderate growth, and manageable global risks, Malaysia’s economy is likely to remain on a stable path.

However, our survey findings show that many households still struggle to save and build financial resilience. This highlights the need for stronger financial education and better support to help Malaysians manage their money, plan for emergencies, and stay prepared for future cost increases.

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