Headline inflation edged down to 1.8% YoY in November (Oct: 1.9%), matching September's level but Kenanga Research said it fell below both its projection (2.0%) and market consensus (2.1%)

The softer inflation reading reflects subdued MoM changes across subcomponents, with food inflation remained muted, transport costs fell sharply, and communication expenses continued to decline. These were partially offset by rising housing and miscellaneous costs. Inflation declined by -0.1% MoM (Oct: 0.2%), marking its first drop in 40 months.

Core inflation held steady at 1.8% YoY for the third straight month, with no change on a monthly basis. Rising core housing costs were offset by declining core transport prices. Subdued food prices and sharper transport declines drive
deflation; marginally offset by rising housing cost.

Food & non-alcoholic beverages (2.6%; Oct: 2.3%): while higher YoY, food prices were muted on a monthly basis as a
marginal decline in meat, fish, fruits and vegetables costs, offset higher milk and oil-based products prices.

Transport (0.4%; Oct: 0.7%): eased for the third straight month, hitting an 11-month low, driven by slower maintenance cost growth for personal vehicles (4.6%; Oct: 4.8%) and a sharp drop in domestic airfares (-19.7%; Oct: 0.8%). Housing (3.2%; Oct: 3.1%): rose to a four month high, mainly due to a 0.4% MoM (Oct: 0.0%) increase in rental cost.

Kenanga said it expects the government to continue its fiscal consolidation efforts, including a potential RON95 subsidy adjustment in early 2H25, with lower Brent price helping to cushion the inflationary impact. Combined with a minimum wage hike and higher civil servant salaries, inflation is projected to shoot up to 2.7%, from below 2.0% this year. Externally, Trump's tariff policies are likely to serve as a bargaining tool, but if implemented, they could temporarily drive up prices. Over time,
however, China's export redirection may contribute to a broader deflationary effect across the region.

Amid heightened uncertainties in 2025, Kenanga noted that Malaysia's relatively stable inflation and growth outlook could lead Bank Negara Malaysia to hold the overnight policy rate at 3.00%. The house said it remains watchful for potential inflation surprises or growth challenges that might prompt a policy adjustment.