Analysts see Malaysia's inflation rate at between two and 2.2pct in 2025
The investment bank noted that while domestic policy action, such as retargeting of the RON95 subsidy, Sales and Service Tax (SST) expansion, wage-related adjustments and the restructuring of electricity tariffs, may exert some upward pressure on prices, the overall impact is expected to remain contained.
"Inflation averaged a soft 1.4 per cent in the first half of 2025 (1H 2025) and is projected to rise to 2.4 per cent to 2.5 per cent in the second half of 2025 (2H 2025), reflecting potential upside risks from the domestic policy action factors.
"However, we also see downside risks to our current inflation projections, particularly due to possible delays in the implementation of the RON95 subsidy retargeting," it said in a research note today.
RHB IB estimated the direct impact of the SST expansion on the consumer price index (CPI) to be negligible at around 0.1-0.2 per cent year-on-year (y-o-y) on a full-year basis. "Nonetheless, we expect some passthrough impact from SST broadening to higher food prices and increased business costs to consumers, albeit in a limited fashion," it said.
The bank also expects the overnight policy rate (OPR) to remain at 2.75 per cent for the remainder of 2025, provided gross domestic product (GDP) growth remains within the long-term range of four to five per cent. "Inflationary pressures to remain manageable. For upcoming meetings in September and November, officials will likely stay data-dependent," it said.
Meanwhile, CIMB Investment Bank Bhd projects the annual CPI at 2.2 per cent in 2025, supported by the relatively limited impact of recent policy adjustments.
"We flag the November monetary policy committee (MPC) meeting as a key event to watch, given two critical developments, namely the tabling of Budget 2026 on Oct 10 and the availability of more meaningful macro-data points. This includes external trade figures for August and September post frontloading activity, as well as advance 3Q 2025 GDP estimates," it said.
Against this backdrop, CIMB Investment expects the OPR to stay at 2.75 per cent through end-2025.
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