Malaysia’s inflation edged higher in March 2026, driven largely by rising fuel prices, while overall economic and financial conditions remained stable, according to Bank Negara Malaysia.
Headline inflation rose to 1.7% in March from 1.4% in February, while core inflation increased to 2.1% from 2.0%. The central bank said the uptick was mainly due to higher retail fuel prices in line with elevated global oil prices, although the impact was cushioned by targeted subsidies for RON95 petrol and diesel.
Lower prices for fresh food items, particularly seafood and meat, helped partially offset the increase.
Meanwhile, Malaysia’s distributive trade growth moderated slightly. The Index of Wholesale and Retail Trade (IOWRT) expanded by 4.4% in February, down from 5.8% in January, as gains in wholesale and retail segments were offset by a contraction in the motor vehicles segment due to weaker car and motorcycle sales.
Credit growth to the private non-financial sector remained steady at 5.6% in March, supported by stronger loan growth, particularly among businesses. Business loan growth rose to 5.8%, driven by higher demand for working capital, especially among non-SMEs, while household loan growth held firm at 5.4%.
However, growth in outstanding corporate bonds moderated to 5.8% from 7.4% previously, reflecting lower bond issuances compared with a year earlier.
The banking system continued to demonstrate resilience, with asset quality remaining stable. Gross impaired loan and net impaired loan ratios were unchanged at 1.4% and 1.0%, respectively, while the loan loss coverage ratio stood at a prudent 125%.
Liquidity levels also remained strong, with the banking system’s aggregate Liquidity Coverage Ratio at 144.6%, providing a buffer against potential shocks.
On the external front, escalating geopolitical tensions in West Asia weighed on global and domestic financial markets, leading to heightened investor caution. The ringgit weakened by 3.8% against the US dollar during the month, broadly in line with regional currencies.
Bond yields also rose, with the 10-year Malaysian Government Securities yield increasing by 15 basis points, tracking global trends amid higher inflation expectations. Meanwhile, the benchmark FBM KLCI declined 1.5%, reflecting subdued investor sentiment amid ongoing uncertainties.
