With consumer prices rising at its slowest pace in more than three years, Malaysia's retail inflation was lower than expected in August official data showed.

Malaysia's main gauge of inflation - The consumer price index - rose 0.2% in August from a year earlier, the Department of Statistics said in a statement and that compares to a median 0.5% increase predicted in a Nikkei Markets poll and July's 0.9% year-on-year gain.

Bank Negara Malaysia will likely focus on keeping economic growth steady and maintain interest rates unchanged even as inflation is expected gather pace in September following a three-month tax holiday, economists said.

"We still expect BNM to leave its policy rate unchanged this year, but see a risk of it sounding increasingly cautious on growth in future monetary policy statements," Nomura Economists Euben Paracuelles and Brian Tan wrote in an investor note. "We do not rule out the possibility of a rate cut in 2019."

With regards to growth in the third-largest Southeast Asian economy, there has been a deceleration for three straight quarters and the economy expanded 4.5% year-on-year between April and June and the government is confident that growth will likely come in around 5% this year.

Since June, inflation in Malaysia has been decelerating after the new government scrapped the multi-stage goods and services tax to follow through its pre-election pledge.