Nairobi, July 7 -- The upward pressure on interest rates is expected to ease after progress in peace negotiations between the US and Iran pulled oil prices to a four-month low, allaying fears of prolonged high inflation.

Analysts say that the Central Bank of Kenya (CBK) now has a strong case to hold its rate unchanged in the next monetary policy meeting in August due to easing inflation, in the process capping the recent jump in short-term rates on government securities.

Since the war in Iran started on February 28, rates on the 91-day and 182-day Treasury bill have gone up by 1.4 and 1.2 percentage points to 8.83 percent and 8.96 percent respectively.

Bond buyers also demanded a return of 15.1 percent on a 25-year paper that was reope...