Malaysia’s 2023 Inflation Moderates; 2024 CPI Forecasted at +3.2%

In the fourth quarter of 2023, Malaysia’s headline inflation rate moderated to +1.6% year-on-year, down from +2.0% in the previous quarter.

This decrease was primarily attributed to lower food and fuel prices, influenced by the high base effect. Despite this moderation, the overall infla tion rate for 2023 remained within expectations, recording +2.5% year-on-year, slightly below the forecasted +2.6%.

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Moving into 2024, inflation is expected to remain modest, reflecting stable costs and demand. However, government measures such as the hike in SST to 8.0% and subsidies rationalizations may lead to higher infla tion compared to 2023. The forecasted CPI for 2024 is +3.2% year-on-year, aligning with the government’s forecast range of 2.5%-3.0%.

Meanwhile, Malaysia’s domestic currency appreciated by +2.1% year-on-year against the USD in 4Q23, driven by the tail-end of the US Federal Reserve’s interest rate hike cycle. As global central banks approach the end of their interest rate hikes, Malaysia’s central bank is expected to maintain the Overnight Policy Rate (OPR) at 3.0% before a potential cut in 4Q24.