Kuala lumpur: Kenanga Investment Bank Bhd has revised its inflation forecast for 2025, reducing it to 1.4 percent from the previous estimate of 1.5 percent, with expectations for 2024 set at 1.8 percent. This adjustment is attributed to the deflationary effects brought about by the Budi95 scheme.
According to BERNAMA News Agency, the investment bank noted that despite the unsubsidised RON95 fuel price being floated in November and rising to RM2.65 per litre, the deflationary impact on the transport sector is anticipated to continue. “The Budi95 scheme remains influential in actual consumption, with households accounting for 78.0 percent of RON95 usage, based on the Finance Ministry’s estimates,” the bank stated in a research note. The October consumer price index (CPI) indicated that a larger proportion of purchases were made at subsidised prices.
Kenanga Investment Bank also suggested that the potential for softer global oil prices in the upcoming months might further reduce transport inflation. However, the bank remains vigilant about possible second-round effects, such as increased operating costs for firms not covered by the Subsidised Petrol Control Scheme and the broader implications of a higher Sales and Services Tax rate.
In terms of policy outlook, Kenanga emphasized that inflation remains stable, with growth momentum improving and domestic demand continuing to drive the economy. The bank believes that the current overnight policy rate of 2.75 percent strikes the right balance, given the recovery in exports and the strengthening of investment sentiment. As long as household spending and investment plans remain steady, there is minimal reason for Bank Negara Malaysia to alter its approach, barring any unexpected changes in US trade policy.
Looking ahead to 2026, RHB Investment Bank Bhd forecasts an inflation rate of 1.8 percent for the following year, aligning with the upper bound of the projected official range of 1.3 percent to 2.0 percent. This prediction reflects an optimistic outlook on domestic demand, bolstered by consistent investment activity, robust consumption, and expansionary fiscal policies.
RHB also highlighted that despite the slight increase, inflation is expected to stay manageable, below the long-term average of 2.0 percent, thanks to orderly policy implementation and the absence of excessive demand pressures. Additionally, softer global commodity prices are likely to help maintain moderate domestic cost conditions. The bank concluded that the impact of announced and forthcoming policy reforms on inflation is expected to be limited, supporting a stable monetary policy stance in the coming year.
Earlier today, the Statistics Department of Malaysia (DOSM) reported that inflation in October 2025 eased to 1.3 percent, down from 1.5 percent in September 2025.