12/09/2025
Based on current and forecast figures for Malaysia, fixed deposit (FD) interest rates are struggling to consistently keep pace with inflation. This means the real purchasing power of money in an FD may decrease over time, even while the nominal value increases.
Fixed deposit rates vs. inflation in 2025
Data from September 2025 shows FD returns are just barely, or sometimes not, keeping up with inflation.
Fixed deposit rates: As of September 2025, promotional FD rates from Malaysian banks like Alliance, MBSB, and OCBC range from 3.58% to 3.90% per annum for tenures of 6 to 12 months.
Inflation rate: In July 2025, Malaysia's headline inflation was 1.2%, with core inflation at 1.8%. However, official forecasts project headline inflation will average between 1.5% and 2.3% for the full year 2025.
The gap: While current promotional FD rates are slightly higher than the latest inflation figures, they offer a very thin margin of real return, especially when compared to inflation in previous years. The possibility of higher inflation in the future also poses a risk to the FD's value.
Why FDs often fail to beat inflation long-term
Fixed interest vs. rising costs: FDs offer a fixed interest rate that does not automatically adjust with changes in the inflation rate. If the cost of goods and services rises faster than the FD interest rate, your purchasing power declines.
Historical context: Historically, especially since the early 2000s, FD rates in Malaysia have often fallen below or only just matched the inflation rate, leading to diminishing real returns.
Variable FD rates: Not all FD rates are equal. The highest promotional rates often have conditions, such as requiring "fresh funds" (money not from your existing accounts at that bank) or bundling with other financial products, which can complicate returns.
Not a long-term growth tool: FDs are designed primarily for capital preservation and are best for short-term savings goals or emergency funds, not for long-term wealth growth.
To counter the eroding effects of inflation, you can explore other investment options offer by DC Academy with potentially higher returns.
Kindly contact us at +6011-36001313 (Dr.Thomas) for more investment portfolios.
