KUALA LUMPUR: Malaysia’s inflation rate in 2026 is expected to remain broadly stable at around two per cent, with a slight upward bias depending on policy shifts and global developments, economists said.
Inflation rose 1.6 per cent in January with the consumer price index climbing to 135.7 from 133.6 a year earlier, according to the Statistics Department.
The increase was driven mainly by personal care, social protection and miscellaneous goods and services, which rose 6.6 per cent from 5.7 per cent in December.
Other contributors included education, which climbed 3.2 per cent from 2.8 per cent, while housing, water, electricity, gas and other fuels grew 1.2 per cent, up from 0.9 per cent.
Chief statistician Datuk Seri Dr Mohd Uzir Mahidin said three states posted inflation rates above the national level of 1.6 per cent, namely Johor at 2.1 per cent, Negri Sembilan at 2.0 per cent, and Pahang at 1.9 per cent.
“However, the remainder 13 states increased below and equal to the national inflation rate with Kelantan recorded the lowest inflation (0.3 per cent) in January.
“All states registered an increase in inflation of food & beverages except Kelantan (-0.3 per cent). Five states recorded increases over the national inflation of food & beverages (1.5 per cent) in January 2026,” he said in a statement.
Mohd Uzir said the largest increase was seen in Negri Sembilan at 3.2 per cent, followed by Pahang at 2.6 per cent, Johor at 2.5 per cent, Kuala Lumpur at 2.0 per cent, and Melaka at 1.7 per cent.
Universiti Teknologi Mara Business Management Faculty senior lecturer Dr Mohamad Idham Md Razak told Business Times that current inflation is markedly lower than the elevated levels seen during the post-pandemic recovery, when global energy and food prices spiked.
He said Malaysia faced stronger inflationary pressures between 2022 and early 2023, but price growth has since gradually returned to more normal levels.
“The present trend reflects improved supply conditions, targeted subsidy measures, and more stable domestic demand, placing inflation closer to its long term historical average,” he said.
Idham said the January inflation rate can be viewed as relatively moderate, indicating that overall price pressures remain under control.
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He added that this points to a period of stable and manageable inflation, rather than signs of demand-driven overheating in the economy.
“The figure also indicates that earlier cost shocks from global supply disruptions and commodity volatility have eased, although pockets of price increases in selected categories show that cost adjustments are still ongoing at the consumer level,” he said.
Idham said the sharper increase in personal care, social protection, and miscellaneous goods and services is largely driven by rising service related costs rather than essential goods inflation.
“Higher labour costs, adjustments in service fees, insurance related expenses, healthcare related services, and lifestyle consumption patterns have contributed to this rise.
“Unlike food or fuel inflation, these categories are more sensitive to wage adjustments and structural cost changes within the services sector,” he added.
UniKL Business School economic analyst Associate Professor Dr Aimi Zulhazmi Abdul Rashid said managing inflation will be challenging, as stronger domestic demand from consumers and businesses amid continued economic expansion could exert upward pressure on prices.
“The inflation rate for 2026 will remain in control around two per cent, as the stronger ringgit will slowly influence the stability of imported goods, especially food,” he added.
He said Malaysia’s January inflation rate is similar to November 2025, while Malaysia’s overall inflation for 2025 averaged 1.4 per cent, down from 1.8 per cent in 2024, mainly due to lower transport and utility costs following targeted subsidies for diesel and RON95.
Aimi said Bank Negara Malaysia is expected to maintain the overnight policy rate at 2.75 per cent throughout 2026.
RHB Research senior economist Chin Yee Sian shared the same view, noting that with stable macroeconomic conditions and inflation remaining manageable, there is no immediate need for a policy tightening.
“However, if the inflation turns out to be higher and more volatile than expected, a rate hike cannot be completely ruled out, particularly against the backdrop of robust economic prospects,” she said in a note.
The firm is maintaining its 2026 inflation forecast at 1.8 per cent, up from 1.4 per cent in 2025, placing it near the top of the official 1.3–2.0 per cent range.
Chin said demand-driven pressures could rise as higher disposable incomes and increased consumption boost overall spending.
She added that improved sentiment from lower tariff risks, strong economic prospects, and enhanced consumer support measures is expected to further stimulate domestic activity.
“Nevertheless, inflation is expected to remain manageable and below the long-term average of two per cent, supported by orderly policy implementation and the absence of excessive demand pressures.
“However, unexpected events, such as escalated geopolitical tensions or unexpected oil supply cuts from oil-producing nations, could create upward pressure on energy prices,” Chin said.
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