Malaysia's annual inflation rate in September was the lowest in more than two years, official data showed on Friday, but the central bank is unlikely to take advantage of steady prices to ease monetary conditions any time soon, economists said.

The consumer price index rose 1.3 percent in September over the previous year, easing from August's 1.4 percent year-on-year increase. Economists polled by Reuters had forecast a rise of 1.4 percent for September.

Prices of food, household equipment and education rose while clothing and communication fell, according to the data from the Statistics Department.

While Malaysia has the lowest rate of inflation among its neighbours, its economy like other trade-reliant nations has run into global headwinds.

Exports fell 4.5 percent in August, on weaker demand in the European Union and China, the biggest year-on-year fall in nearly three years, while factory output in the same month slipped 0.7 percent from a year ago, the first decline in 13 months.

Cut in rates not expected

But analysts said they did not expect the Malaysian central bank to cut rates as some others, including Thailand, South Korea and Australia, have done this month to support growth.

"Bank Negara is unlikely to capitalise on the low-inflationary backdrop to ease rates, as a premature shift to an accommodative stance ups the risk of financial sector instability and fans hhousehold debt levels," Forecast Pte economist Radhika Rao said.

The government is banking on domestic demand and its own spending to support growth and offset weakness in the external sector.

The economy grew a surprisingly strong 5.4 percent in the second quarter and the central bank held the main policy rate at 3.0 percent in September, saying domestic demand was helping shore up the economy.

Third quarter gross domestic product data is due out on Nov 16 while Bank Negara holds its final meeting of the year on Nov 8.

- Reuters