Inflation in Malaysia edged higher in August 2026, driven primarily by rising prices in food, energy, and transport sectors, according to data released by the country’s Statistics Department. The consumer price index (CPI) for food and non-alcoholic beverages rose 1.9% year-on-year, marking the highest level in nearly 12 months, compared with a 1.8% increase in July.

Phillip Capital Research pointed to continued inflation in food consumed at home as a key factor behind August’s uptick. The firm also noted a rise in the housing, water, electricity, gas, and other fuels segment, which saw inflation climb to 2.1% from 1.8%, primarily due to increased electricity tariffs under the Automatic Fuel Adjustment mechanism. Transportation costs rebounded as well, accelerating to 2.0% from 1.4% amid rising prices for unsubsidised motor fuels.

These developments accompany broader inflationary pressures linked to a rebound in global crude oil prices, which exceeded US$100 per barrel in September after averaging around US$88 per barrel in August. Global food price inflation also accelerated to 2.5% year-on-year in August, following two months of easing, according to Phillip Capital Research.

Despite these upward pressures, analysts suggest that domestic inflation should remain relatively contained due to government subsidy measures. The Malaysian government has restored the monthly quota of Budi95 petrol to 300 liters, increased the diesel quota for eligible vehicle owners, and raised the electricity bill protection threshold. Phillip Capital Research maintained its headline inflation forecast at 1.8% for 2026 and expects Bank Negara Malaysia (BNM) to keep the overnight policy rate (OPR) steady at 2.75% for the remainder of the year.

Kenanga Research echoed the view of rising food-related inflation, highlighting that prices for vegetables surged by 2.8%, with tomatoes up sharply by 38.2%, and chicken prices rising 8%. The research firm emphasized that transportation, housing, and food categories were the main contributors to the inflation pickup. While headline inflation slightly exceeded expectations, core inflation — which excludes volatile items — eased to 1.7% from 1.8%.

Kenanga Research also noted that energy costs were increasingly impacting the domestic economy despite ongoing government subsidy efforts. While prices for Ron95 petrol have remained fixed under the Budi95 scheme, the firm pointed out that airfares and freight-sensitive food items continue to rise. The research house revised its 2026 inflation forecast downward to 1.9% from 2.1%, citing the cushioning effect of subsidies, and expects BNM to maintain the OPR at 2.75% throughout the year.

Apex Securities Research attributed the moderate inflation increase mainly to transport and electricity price rises, while indicating that underlying price pressures remain subdued. Headline inflation moved up to 1.9% in August from 1.8% in July, slightly above consensus forecasts. Meanwhile, core inflation declined to 1.7%, the lowest level since December 2024, suggesting a moderation in domestic demand-driven price pressures.

Overall, inflationary risks for the remaining months of 2026 are seen as modestly tilted upward due to external factors such as energy and food price fluctuations, but domestic policy measures are expected to continue mitigating significant upward changes.