Economic Update
Local
Malaysia Inflation Rate - Modest inflation supports key reforms
Thu, 23-Oct-2025 07:34 am
by Research Team • Apex Research

  • Headline inflation edged up to +1.5% YoY in September (Aug: +1.3%), slightly above consensus, partly driven by water tariff adjustments.

  • Core inflation rose to +2.1% YoY (Aug: +2.0%), signalling resilient domestic demand. Government’s cash aid has helped support household consumption momentum. 

  • Implementation of reform measures such as water tariff adjustments in a low-inflation environment is timely, helping to contain near-term price risks.   

  • We expect headline inflation to stay steady in the remaining months, as lower fuel prices under the Budi95 scheme offset modest cost pass-through from other measures.

  • We maintain our 2025 and 2026 inflation forecasts at +1.4% YoY and +2.0% YoY, respectively. The projected uptick in 2026 reflects continued passthrough from fiscal and cost-reform measures, including SST expansion, minimum wage adjustments, insurance premium hikes, and utilities tariff rationalisation, alongside firm domestic demand.

 

Inflation edged up partly on water tariff hikes     

Malaysia’s headline inflation inched up to +1.5% YoY in September (Aug: +1.3%), slightly above Bloomberg consensus of +1.4%. Price gains were led by food (+2.1%; Aug: +2.0%), transport (+0.7%; Aug: +0.2%), health (+1.3%; Aug: +1.1%), and housing, water, electricity, gas & other fuels (+1.5%; Aug: +1.2%). Notably, water supply costs surged to +7.8% (Aug: +2.7%) following water tariff adjustments effective 1 September in Selangor, KL and Putrajaya, while other states will implement the new rates at different dates.

 

Core inflation rose further   

Core inflation rose to +2.1% YoY (Aug: +2.0%), the highest since October 2023, signalling resilient domestic demand despite soft global trade conditions. That said, the uptick remains contained and at a measured pace. Government cash aid, including the one-off RM100 SARA payout, has helped lift disposable income for lower-income households, supporting consumption momentum and domestic demand.

 

Timely reforms amid subdued inflation     

The steady inflation trend underscores Malaysia’s success in manoeuvring key reform measures, including the expanded SST as well as electricity and water tariff adjustments, without causing extensive price volatility. Implementing these initiatives in a low-inflation environment is timely, supporting structural reforms while containing near-term inflation risks. In particular, water tariff adjustment will spur much-needed capex in the under-invested water sector and help address long-standing inefficiencies.

 

Steady inflation outlook into 2026

We expect headline inflation to hover around +1.5% YoY over the remaining months of 2025, as the lower RON95 pump price for eligible Malaysians under the Budi95 scheme offsets the modest passthrough from other cost adjustments. With 9M25 inflation averaging +1.4%, we maintain our full-year 2025 forecast at +1.4%.

 

Looking ahead, we reaffirm our 2026 inflation forecast at +2.0% YoY, the upper end of the official projection range of 1.3–2.0%, reflecting extended passthrough effects from the SST expansion, minimum wage adjustments, insurance premium hikes, and utilities tariff reforms, alongside resilient domestic demand.

 

Sentiment: Neutral
Read more details in:

Disclaimer

The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.

Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.183360 4.212600
EUR 4.873028 4.878308
CNY 0.589871 0.590472
HKD 0.538522 0.542295
SGD 3.220053 3.242721