Bank Negara Malaysia: inflation to average 1.5%-2.3% in 2025

Bank Negara Malaysia: inflation to average 1.5%-2.3% in 2025

Malaysia's inflation rate continued its downward trend in June 2025, reaching 1.1% year-on-year (YoY), according to the latest data from OCBC Bank. This figure is lower than the market consensus and OCBC's previous projection of 1.2% [1]. Core inflation remained stable at 1.8% YoY, indicating that the decrease in headline inflation was primarily driven by lower prices in transportation, communication services, and furnishing [1].

OCBC Bank Malaysia's Senior ASEAN Economist, Lavanya Venkateswaran, attributed the subdued inflation print to a deceleration in transportation prices, ongoing deflation in communication services, and moderation in furnishing prices [1]. Key categories such as food, utilities, education services, and insurance remained unchanged from May [1].

In light of these developments, OCBC has revised its 2025 headline Consumer Price Index (CPI) forecast downwards to 1.5% from a previous estimate of 2.0%. This adjustment reflects the lower-than-expected inflation rate of 1.4% in the first half of 2025 and the reduced prospects of RON95 rationalization [1]. The government is currently reviewing the subsidy mechanism, making a 20-25% increase in RON95 prices less likely in the immediate future [1].

Bank Negara Malaysia (BNM) expects Malaysia's GDP growth to slow in the second half of 2025 to 3.5% YoY from 4.4% in the first half of 2024, coupled with persistently low inflation. This scenario provides room for further monetary policy easing [1]. OCBC forecasts another 25 basis points rate cut from BNM for the remainder of the year [1].

BNM's Monetary Policy Committee (MPC) last met on July 9, 2025, where it decided to cut the Overnight Policy Rate (OPR) by 25 basis points to 2.75%. The next MPC meetings are scheduled for September 4, 2025, and November 6, 2025, providing potential windows for further policy adjustments [1].

References:
[1] https://www.businesstoday.com.my/2025/07/22/ocbc-lowers-malaysias-2025-inflation-forecast-to-1-5/