Inflation projected to hover around 1.5%-2.5% in 2026

 Bank Negara Malaysia says targeted policies are in place to help cushion the impact of developments in global commodity and energy prices.

BNM governor Abdul Rasheed Ghaffour said government initiatives such as BUDI95 will help limit the passing of global cost hikes to consumers. (Bernama pic)

KUALA LUMPUR:

 Bank Negara Malaysia (BNM) expects headline inflation to hover between 1.5% and 2.5% in 2026, despite threats posed by the Middle East conflict.

BNM governor Abdul Rasheed Ghaffour said the central bank does not foresee the country experiencing excessive demand pressures, while government schemes like BUDI95 will help limit the passing of global cost hikes to consumers.

“While upside risks stemming from developments in global commodity and energy prices remain, targeted policies are in place to help cushion the impact on households and businesses,” he said in BNM’s 2025 annual report released today.

Rasheed said last year’s headline inflation averaged 1.4%.

However, he added that the global landscape was becoming less predictable, pointing to developments in the Middle East.

Rasheed said the ripple effects of the conflict underscored the urgency for Malaysia and Asean to deepen domestic and regional reforms.

He noted that BNM’s monetary policy committee (MPC) reduced the overnight policy rate from 3% to 2.75% in July 2025 in the face of rising global uncertainties, including the threat of US tariffs.

This was a preemptive move to secure the nation’s growth path and buffer against emerging downside risks from global uncertainties.

“The decision reflected an intention to act early, guided by a forward assessment of evolving risks, and supported by a contained inflationary environment that provided the space for prompt action.

“Since then, the transmission of monetary policy has remained orderly and in line with expectations. This adjustment is expected to provide additional support to the economy into 2026,” he said.

Similarly, for the year, the MPC will continue to monitor developments and assess the balance of risks to the growth and inflation outlook, he said. - FMT