Kuala lumpur: RHB Investment Bank Bhd (RHB IB) has maintained its 2026 inflation projection at 1.8 per cent, up from 1.4 per cent in 2025. This forecast sits near the upper end of the official range of 1.3-2.0 per cent, indicating firmer domestic demand.
According to BERNAMA News Agency, RHB IB's Economics View report suggests that demand-driven pressures could escalate due to increased disposable incomes and consumption, which are expected to boost overall spending. Improved sentiment from reduced tariff risks, strong economic prospects, and enhanced consumer support measures are projected to further stimulate domestic activity.
Despite these pressures, RHB IB anticipates that inflation will remain manageable and below the long-term average of 2.0 per cent. The investment bank highlights the importance of orderly policy implementation and the absence of excessive demand pressures in maintaining this stability.
RHB IB also warned that unexpected geopolitical tensions or oil supply cuts from producing nations could exert upward pressure on energy prices, potentially leading to a higher and more volatile inflation rate. In such scenarios, a rate hike cannot be completely ruled out, especially considering the robust economic prospects.
The report identifies several factors expected to drive inflation in the upcoming year. These include demand-led inflationary pressures, changes in domestic policies, adjustments in RON95 prices and subsidy mechanisms, impacts from electricity tariff restructuring, and fluctuations in global commodity prices.
Additionally, RHB IB expects the overnight policy rate (OPR) to remain unchanged at 2.75 per cent in 2026. Monetary policy decisions are likely to remain data-dependent, guided by economic growth prospects and underlying inflation dynamics. The bank noted that stable macroeconomic conditions and manageable inflation mitigate immediate pressure for policy tightening.
The Department of Statistics Malaysia (DOSM) reported a 1.6 per cent increase in Malaysia's inflation in January 2026, with index points rising to 135.7 from 133.6 in the same month last year. Chief statistician Datuk Seri Dr Mohd Uzir Mahidin attributed this increase to growth in four key groups, led by personal care, social protection, and miscellaneous goods and services.
Meanwhile, Kenanga Investment Bank Bhd predicts that inflation will remain contained in 2026, even as growth persists. Fiscal transfers and credit guarantees are expected to support household demand without generating broad overheating. The bank highlighted the role of targeted fuel and electricity subsidies in limiting cost pass-through, alongside gradual reforms.
Kenanga also noted that the ringgit's appreciation is contributing to imported disinflation by lowering prices for fuel, food, and intermediate goods. However, risks remain from sales and services tax (SST) expansion, migrant levy adjustments, and potential geopolitical disruptions. The bank concluded that in the absence of a commodity shock or wage spiral, inflation should remain below its long-term average.
The investment bank expects policy to remain stable, with growth easing and price pressures contained. Bank Negara Malaysia is likely to maintain the OPR at 2.75 per cent to preserve credibility and exchange-rate stability while retaining flexibility for external conditions.