UOB reports that the central bank of Malaysia, Bank Negara Malaysia (BNM) expects 2026 headline inflation to average 1.5%-2.5%, with core inflation at 1.8%-2.3%. Cautious pricing behaviour, domestic policy support and a firm exchange rate help offset commodity volatility linked to Middle East tensions and weather. Weaker global demand and softer commodity prices are seen tempering inflation further.

BNM projects low, stable price growth

"Inflationary pressures are expected to remain contained, with cautious pricing behaviour across the retail and services sectors following heightened volatility in global commodity prices linked to disruptions from the Middle East conflict and weather-related factors. The Financial Stability Report noted that firms were already facing elevated cost pressures in 2H25 prior to the conflict. Thus, smaller firms are likely to enter this widening conflict with already compressed margins."

"BNM forecasts headline inflation to average 1.5%-2.5% this year (UOB est: 2.0%) and core inflation between 1.8%-2.3% amid ongoing domestic policy support and firm exchange rate. Economic activity is projected to stay in line with potential growth which is not expected to general material demand driven inflation pressures."

"Having said that, weaker global demand and softer commodity prices are seen as potential factors tempering the inflation conditions."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)