Malaysia’s April inflation stable at 1.4%, but core rate hits 17-month high

[KUALA LUMPUR] Malaysia’s headline inflation held steady at 1.4 per cent year on year in April, while core inflation increased to 2 per cent from a year earlier, based on data released by the Department of Statistics Malaysia (DOSM) on Thursday (May 22).

The final figure of headline inflation marked the slowest pace since November 2023, aligning with economists’ forecast in a recent Reuters poll and consistent with the 1.4 per cent recorded in March.

However, core inflation – which excludes volatile items such as food and fuel – rose to 2 per cent year on year, the highest since October 2023. It stood at 1.9 per cent in both February and March, signalling a gradual upward trend since the start of 2025.

Mohd Uzir Mahidin, chief statistician of DOSM, said the increase in core inflation was driven by higher prices of personal care, social protection and miscellaneous goods and services, food and beverages, and restaurant and accommodation services.

Out of the 573 items tracked in the consumer price index (CPI), prices of 332 items increased (nearly 58 per cent), while 186 (32.5 per cent) recorded declines, said DOSM.

The report showed that food and beverage prices – accounting for nearly 30 per cent of total CPI – rose 2.3 per cent year on year in April, easing slightly from 2.5 per cent in March.

Prices in housing, water, electricity, gas and other fuels – making up about 23.2 per cent of the index – increased 2 per cent in April, compared with 1.9 per cent in the previous month.

Uzir noted that stable prices of administered items such as cooking gas, fuel, and public transport fares helped keep headline inflation in check.

Regionally, Malaysia’s inflation rate matched that of the Philippines in April, but was higher than Thailand’s, which recorded deflation of 0.2 per cent. Inflation in Vietnam and Indonesia stood at 3.1 per cent and 2 per cent, respectively.

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In comparison, the eurozone and the US reported April inflation rates of 2.2 per cent and 2.3 per cent.

Bank Negara Malaysia governor Abdul Rasheed Ghaffour said on May 16 that inflation is expected to remain moderate in 2025, citing more stable global cost conditions and the absence of excess demand.

However, he cautioned that external risks such as global commodity price volatility and trade tariffs could pose upside risks. Domestically, the implementation of policy reforms – particularly subsidy rationalisation – may also contribute to price pressures, going forward.

MIDF Research anticipates moderate inflation will extend into the second quarter of 2025, despite impending subsidy rationalisation and other policy adjustments this year.

The firm revised its inflation forecast for the year to 2.2 per cent, a slight adjustment from its previous projection of 2.5 per cent, reflecting lower-than-expected headline inflation and a softening global oil outlook.

Consequently, MIDF Research expects the Overnight Policy Rate (OPR) to remain at 3 per cent throughout 2025, due to the absence of strong demand-pull inflation, with the current policy setting seen as supportive of sustainable economic growth.

UOB economists Julia Goh and Loke Siew Ting project full-year inflation to average 2.3 per cent this year and expect that Bank Negara may reduce interest rates in the coming Monetary Policy Committee meeting in July or September.

“We have pencilled in two 25 basis-point OPR cuts in the second half of 2025. We took a more cautious view on the trade negotiation outcomes while sector-specific tariffs are expected to be unveiled,” said Goh and Loke in a note on Thursday.