Kuala Lumpur: Public Investment Bank Bhd (PIVB) has lowered its 2025 full-year Consumer Price Index (CPI) forecast to 2.4 per cent from 3.0 per cent previously. This adjustment comes in response to a softer-than-anticipated start to the year, with January and February inflation averaging just 1.6 per cent year-on-year (y-o-y), it said in a note today.
According to BERNAMA News Agency, the Department of Statistics Malaysia announced last Friday that the headline CPI eased to 1.5 per cent y-o-y in February, down from 1.7 per cent in January. PIVB noted that this early shortfall suggests a more subdued inflation path in the first half of 2025, bringing full-year expectations closer to the lower end of the official range of 2.0-3.5 per cent.
PIVB stated that while they continue to monitor domestic cost pressures expected from mid-year policy shifts, including adjustments to fuel subsidies, utility rates, and labour-related levies, the recent trend points to a more gradual and possibly delayed pass-through. The momentum in core CPI has picked up modestly but remains contained, limiting evidence of broader inflation spillovers for now.
On the external front, PIVB highlighted that renewed trade policy risks following the US elections, along with ongoing forex and commodity market volatility, may introduce cost-side pressures in the second half of 2025 (2H 2025), although transmission will likely be uneven. They expect inflation to regain momentum in 2H 2025, albeit at a more moderate pace than previously projected, supporting a downward revision to their full-year forecast.
The investment bank identified key inflation drivers to watch this year, including the targeted RON95 petrol subsidy rationalisation by mid-year, adjustments to the minimum wage, and an expanded scope for the Sales and Services Tax. Further subsidy rationalisation on essential goods, potential electricity tariff adjustments in 2H 2025, as well as rising labour costs from mandatory Employees Provident Fund contributions for foreign employees and the multi-tier foreign worker levy could add to cost-push and demand-driven pressures on consumer prices.