Inflation rose in March, reflecting higher fuel prices
- In March, headline and core inflation[1] rose to 1.7 per cent and 2.1 per cent (February 2026: 1.4 per cent and 2 per cent), respectively.
- The increase in headline inflation was mainly driven by higher retail fuel prices, in line with elevated global oil prices, although the overall impact was moderated by continued targeted subsidies for RON95 and diesel[2].
- This was partly offset by lower fresh food prices, particularly seafood and meat.
IOWRT grew moderately, supported by wholesale and retail gains, offset by contraction in vehicles
- The Index of Wholesale and Retail Trade (IOWRT) moderated to 4.4 per cent in February (January 2026: 5.8 per cent).
- Growth in the wholesale and retail segment improved. This was mainly driven by wholesale of food, beverages, tobacco, and household goods, as well as retail trade in non-specialised stores[3] and retail sale of other household equipment in specialised stores[4], respectively.
- However, this was more than offset by the decline in the motor vehicle segment due to lower car sales and sales, maintenance and repair of motorcycles.
Growth in credit to the private non-financial sector was sustained in March
- Credit to the private non-financial sector grew by 5.6 per cent (February 2026: 5.6 per cent), supported by higher growth in outstanding loans (5.6 per cent; February 2026: 5.1 per cent). In contrast, growth in outstanding corporate bonds moderated to 5.8 per cent (February 2026: 7.4 per cent) due to lower bond issuances relative to the corresponding period last year.
- Business loan growth increased to 5.8 per cent (February 2026: 4.6 per cent) following higher loan growth among non-SMEs, particularly for working capital purposes. Meanwhile, growth for investment-related[5] loans remained steady across both SMEs and non-SMEs.
- Household loan growth was sustained at 5.4 per cent (February 2026: 5.5 per cent) amid steady loan growth across most purposes.
Banks’ asset quality remained sound
- Gross and net impaired loans ratios continued to be stable at 1.4 per cent and 1 per cent, respectively.
- Loan loss coverage ratio (including regulatory reserves) remained prudent at 125 per cent of gross impaired loans (February 2026: 124.7 per cent).
High liquid assets to buffer against any liquidity shocks
- The banking system continued to record healthy liquid asset buffers with an aggregate Liquidity Coverage Ratio of 144.6 per cent (February 2026: 149.4 per cent).
The escalation of the West Asia conflict weighed on global and domestic financial markets
- The escalation of the West Asia conflict has led to elevated geopolitical uncertainty, contributing to more cautious global investor sentiment with spillovers to domestic financial markets.
- The US dollar strengthened, reflecting global risk-off sentiment. The ringgit depreciated by 3.8 per cent against the US dollar (NEER[6]: -1.8 per cent), broadly in line with regional peers (regional average[7]: -3.6 per cent).
- The 10-year MGS yield increased by 15 bps (regional average7: +55 bps), in line with movements of bond yields abroad, following higher global inflation expectations. Meanwhile, the FBM KLCI declined by 1.5 per cent (regional average7: -10.2 per cent), reflecting cautious investor sentiment amid heightened geopolitical risks.
[1] Core inflation is computed by excluding price-volatile and price-administered items.
[2] As of March 2026, Malaysian users remained eligible for a subsidised RON95 price of RM1.99/litre up to 300 litres under the BUDI95 programme. Diesel users in Sabah and Sarawak also continued to pay a subsidised price of RM2.15/litre.
[3] Refers to supermarkets and department stores.
[4] Refers to construction materials, hardware, carpets, curtains, wallpaper and household furniture.
[5] Comprises loans for the purchase of non-residential properties, residential properties for business use, fixed assets, as well as for construction activities.
[6] NEER refers to the ringgit nominal effective exchange rate, which measures the ringgit’s movement against a basket of currencies of Malaysia’s major trading partners.
[7] Regional countries comprise Singapore, Thailand, the Philippines, Indonesia and Korea.
—Bank Negara Malaysia
