Malaysia’s Headline Inflation Edges Up to 1.9% in August as Core Inflation Softens
The Department of Statistics Malaysia announced August inflation figures on September 18 and headline inflation ticked up to 1.9% y/y in August from 1.8% in July, driven by higher transport, housing and fuel costs. Given easing core inflation, targeted subsidies, price caps on staple goods, and a stronger Ringgit in late August, we expect inflation will remain moderate throughout the remainder of the year and hit 1.9% y/y in 2026.
Bottom Line Up Front (BLUF): The Department of Statistics Malaysia announced August inflation figures on September 18. Headline inflation ticked up to 1.9% y/y in August from 1.8% in July, driven by higher transport, housing, water, electricity, and fuel costs. Core inflation softened from 1.8% in July to 1.7% in August marking its lowest point since December 2024. Given easing core inflation, targeted subsidies, price caps on staple goods, and a stronger Ringgit in late August, we expect inflation will remain moderate throughout the remainder of the year and hit 1.9% y/y in 2026.
Figure 1: CPI, Core Inflation (YoY, % Change) and Policy Rate (%), September 2024 – August 2026
Source: IslamicMacro
The Department of Statistics Malaysia reported that headline inflation edged up to 1.9% y/y in August from 1.8% in July. Annua transport costs accelerated to 2.0% in August (up from 1.4% in July), while inflation for housing, water, electricity, gas, and other fuels rose to 2.1% (up from 1.8%). Meanwhile, restaurant and hotel services experienced a minor uptick, moving to 2.1% from 2.0%.
On a m/m basis, the CPI increased by 0.3% in August after remaining flat in July. Core inflation eased slightly from 1.8% in July to 1.7% in August, hitting its lowest level since December 2024, was good news for Malaysian economy.
Although headline inflation rose slightly in August, we foresee price pressures will remain manageable through Q4 2026 and Q1 2027. Easing core inflation, combined with government price controls and targeted subsidies, should continue to insulate the domestic economy from global price volatility. We think the Ringgit's strengthening against the US Dollar in the second half of August helped temper imported inflation, partially offsetting external cost pressures on food and raw materials.
Crucially, inflation remains well within Bank Negara Malaysia's target range of 1.5%–2.5%, underscoring the economy's resilience against external shocks. With core inflation moderating to 1.7%, the regulator continues to feel moderate pressure to tighten monetary policy to curb domestic demand, leaving room for currency stability and controlled domestic liquidity to maintain price stability heading into 2027. We expect inflation will remain moderate throughout the remainder of the year and hit 1.9% y/y in 2026 due to pressures linked with adverse global developments.
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Analyst / Author Declaration: I, Volkan Sezgin, Independent Analyst and Researcher, declare that the views and conclusions expressed in this publication reflect my professional judgment at the time of publication and are presented in good faith. The analysis has been prepared independently and without improper influence or inducement. Where applicable, material conflicts of interest are disclosed. I observe applicable professional and internal compliance standards concerning confidentiality, independence and the responsible use of information.