BNM: INFLATION LIKELY TO TREND AT MANAGEABLE LEVEL OF 2.0-3.5 PERCENT IN 2025

KUALA LUMPUR, March 24 (Bernama) -- Inflation is expected to trend higher between 2.0 per cent to 3.5 per cent this year compared to an average of 1.8 per cent in 2024, according to Bank Negara Malaysia (BNM). 

In its Economic and Monetary Review 2024 released today, BNM noted that the inflation level will remain manageable amid easing global cost conditions and the absence of excessive demand pressures.

BNM said that global commodity prices are expected to continue moderating, leading to lower production costs for firms.

The central bank said that domestically, underlying demand conditions will remain moderate due to stable private consumption growth and wage gains that are in line with productivity growth.

“The inflationary impact from announced domestic policy measures and tax adjustments, including the targeted RON95 subsidy rationalisation and sales and services tax (SST) expansion, is expected to be temporary and well-contained,” BNM said, adding that the direct impact of the measures is anticipated to dissipate within a year and remain manageable, given the targeted approach of the policies.

The Malaysian economy is projected to grow between 4.5 per cent and 5.5 per cent in 2025, with domestic demand being the main driver of growth, supported by steady private sector expenditure, despite external uncertainties, said BNM.

Higher household spending will be driven by employment and faster income growth as well as policy support, while investment activity will continue to see a robust expansion as the investment upcycle continues into 2025. 

In 2024, headline and core inflation moderated, both averaging 1.8 per cent (2023: 2.5 per cent and 3.0 per cent), below its historical average (2011-19 average: 2.2 per cent), attributed to easing global cost conditions and stable demand.  

The overnight policy rate (OPR) was maintained at 3.00 per cent to support price stability and sustainable economic growth in 2024.  

BNM said the monetary policy committee (MPC) will remain vigilant of spillovers from an uncertain global environment and the impact of potential domestic policy changes.

“Amid this uncertainty, the formulation of monetary policy will continue to be guided by the evolving balance of risks surrounding the outlook on Malaysia’s inflation and growth,” it added.

In 2024, the Malaysian economy remained strong, driven mainly by robust domestic demand, higher household spending and expansion in investment activity. 

Exports also benefitted from the global technology upcycle and strong non-electrical and electronics goods.

-- BERNAMA