Malaysia's headline inflation is expected to have remained flat at 1.5% y/y in January and February, matching the December value, according to CEIC’s proprietary weekly inflation nowcast. This follows overall disinflation trend reported since Q3. The official data for January is scheduled for release on Friday, 23 February 2024.

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The nowcast pointed to some mid-month inflationary pressures, likely from the run-up to the Lunar New Year in mid-February and from residual end-of-2023 holiday seasons with moving average weekly inflation ranging from 1.3-1.6% throughout January. However, even if inflation surprises on the mild upside, Bank Negara, the Central Bank, is likely to place more weight on broader deceleration in price growth, especially with core inflation and stand pat on the Overnight Policy Rate. CEIC Nowcast also anticipates continued moderation of core inflation as the generalisation of lower price growth continues. Additionally, the less hawkish overtones of the 31 January US Fed meeting reduced the pressure for Bank Negara to consider rate hikes.

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CEIC employs a machine-learning model that leverages high-frequency and alternative data to provide insightful weekly inflation estimates. This advanced framework not only offers a forward-looking perspective but also reveals the underlying factors and high-frequency indicators shaping inflation dynamics. According to the model, the predictors of inflation in Malaysia have undergone substantial shifts in the past six months, reflecting the evolving economic landscape and price movements. While fuel prices were the dominant predictors until March 2023, the dynamics have since shifted, with the nowcast now primarily influenced by changes in the assets and liabilities of the central bank, followed by supply chains dynamic.

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