Malaysia’s CPI Moderates to 1.3 Percent Driven by Slower Food Price Increases
Malaysia’s inflation rate experienced a noticeable easing in October 2025, slowing to 1.3 percent from the 1.5 percent recorded in September 2025, according to data released by the Department of Statistics Malaysia (DOSM) in its latest Consumer Price Index (CPI) report.
This moderation in the overall CPI was primarily attributable to significantly slower price increases within a few key expenditure groups, most notably the food and beverages category.
Price growth in the food and beverages group eased substantially to 1.5 percent in October, down from the 2.1 percent rate observed in September 2025, reflecting either reduced cost pressures or decreased demand for certain items within this critical group.
Similarly, the housing, water, electricity, gas, and other fuels group also contributed to the overall deceleration of the CPI, recording a milder 1.1 percent increase, a reduction from the 1.5 percent seen in the previous month.
However, the moderation was partially offset by accelerating price pressures in several other categories, indicating a complex inflation environment across the Malaysian Economy.
For example, the cost of personal care, social protection, and miscellaneous goods and services jumped significantly to 6.0 percent, rising from 4.8 percent in September.
Price hikes were also observed in restaurants and accommodation services, which moved up to 3.4 percent, health costs (1.5 percent), recreation, sport, and culture (1.2 percent), and furnishings, household equipment, and routine household maintenance (0.3 percent), all recording higher rates than the prior month, preventing a steeper decline in the headline CPI.
Core Inflation Rises Amid Divergent Price Movements and Administered Items
Despite the slowdown in the headline CPI, Malaysia’s core inflation, which excludes volatile fresh food and administered prices to better reflect underlying demand and structural cost pressures, actually rose to 2.2 percent in October 2025, up from 2.1 percent in September.
This uptick in core inflation confirms that underlying price pressures in the Economy are still strengthening in specific sectors.
This increase was driven by the persistent and accelerating price hikes in personal care, social protection, and miscellaneous goods and services (6.0 percent), restaurants and accommodation services (3.4 percent), and health (1.5 percent), among others.
Interestingly, while contributing to the overall CPI moderation, the food and beverages component in the core measure and transport recorded slower increases compared to the previous month, suggesting that the inflationary momentum in these sectors may be receding slightly or that the price hikes are becoming more selective.
DOSM’s detailed analysis showed that approximately 60 percent of the items measured in the CPI basket recorded some form of price increase during the month, totaling 344 out of 573 items.
Of these increasing items, the vast majority—335 items, or 97.4 percent—recorded rises of 10 percent or less, indicating broad but generally moderate price inflation.
Crucially, the report highlighted the mitigating role played by administered prices, which are prices set or controlled by the government.
The prices of key items such as cooking gas for domestic use, cigarettes, unleaded petrol RON95, and government hospital medical expenses all remained unchanged compared with the same month last year, effectively easing the overall inflation rate and preventing the headline CPI from rising higher.
State-Level Disparities and the Regional Economic Landscape
The inflation experience in Malaysia was far from uniform, showing significant disparities at the state level, which is critical for Business planning and localized monetary policy assessment.
Most states recorded inflation rates below the national average of 1.3 percent in October, with Kelantan experiencing the lowest rate at a mere 0.1 percent, suggesting minimal price growth in that region.
However, six key states—Johor (1.9 percent), Negeri Sembilan (1.7 percent), Selangor (1.6 percent), Wilayah Persekutuan (WP) Kuala Lumpur (1.6 percent), Melaka (1.4 percent), and Terengganu (1.4 percent)—all recorded inflation rates that were above the national level, indicating stronger economic activity and/or higher cost pressures in these key commercial and industrial centers.
A closer examination of the food and beverages group, a core component of the CPI, revealed that all states still experienced price increases, though Kelantan was an outlier with a -0.6 percent change, likely due to localized supply or consumption patterns.
Eight states recorded food and beverages inflation above the national average of 1.5 percent, including Negeri Sembilan (2.6 percent), WP Labuan (2.5 percent), and Melaka (2.3 percent), reflecting intense cost-of-living pressure in these areas.
In a regional comparison, Malaysia’s 1.3 percent inflation rate was notably lower than that of several regional peers, including the Philippines (1.7 percent), Indonesia (2.9 percent), and South Korea (2.4 percent), positioning Malaysia favorably in the Asia Pacific Economy for macroeconomic stability, although its rate was higher than that of China (0.2 percent).
Implications for Investment and Monetary Policy in the Malaysian Economy
The divergent trend between the moderating headline CPI (1.3 percent) and the rising core inflation (2.2 percent) presents a nuanced challenge for Bank Negara Malaysia (BNM) in its Finance and monetary policy decision-making.
The headline deceleration, driven by slower food and housing price growth, provides temporary relief and may reduce immediate pressure for interest rate hikes.
However, the persistent increase in core inflation, fueled by services like personal care and accommodation, signifies that demand-side and structural cost pressures are building within the domestic Economy.
This shift implies that inflation is becoming less about volatile global commodity prices and more about robust domestic demand and rising input costs in the services sector.
For Investment, this scenario strengthens the case for sectors tied to domestic consumption and services, such as banking, healthcare, and discretionary spending, as they are capable of passing on higher costs.
Conversely, the continued reliance on administered prices to suppress the overall CPI creates a structural risk.
Should the government decide to lift these price controls—such as subsidies on fuel or utilities—the built-up inflationary pressure would be released immediately, potentially causing a sharp spike in the headline rate and forcing BNM to aggressively tighten its policy stance.
Therefore, while the current low headline CPI looks attractive for Business sentiment, investors must remain keenly focused on the stickier core inflation and the policy risk associated with administered prices to accurately forecast the future trajectory of the Malaysian Economy and BNM’s actions.
Contextualizing Rate Expectations: A Year-Over-Year Analysis
The market’s sensitivity to the prospect of a December rate cut is amplified by the significant shift in the US monetary stance over the past year, moving from aggressive hikes to a cautious easing cycle.
As of November 2025, the Federal Funds Target Rate range stands at 3.75%–4.00%, following two 25 basis point cuts in September and October of 2025.
Comparatively, the US Fed’s stance one year ago, in November 2024, saw the Federal Funds Target Rate range at a higher 4.50%–4.75%, following a 25 basis point reduction from an even higher peak.
This trajectory—a 75 basis point reduction over twelve months—sets a firm precedent for easing, making any strong economic data, like the unexpected job growth, a significant market event that challenges the expected pace of future rate cuts.
The current 3.75%–4.00% rate is considered accommodative compared to the peak of the hiking cycle but remains restrictive enough to impact the non-yielding gold, causing volatility when the path to further cuts (like the anticipated December cut) is placed into doubt by robust economic signals.
The sensitivity of Antam’s gold price to these small US interest rate changes illustrates the enduring dominance of US monetary policy in setting the global opportunity cost for holding non-interest-bearing assets like gold, directly affecting the Indonesian Investment climate.
