By WASHINGTON AKUMU

Inflation went down last month in the wake of price falls on most basic goods, according to the Central Bank of Kenya (CBK).

There were price decreases on maize grain, beans, greengrams, fruits and vegetables.

The CBK's Weekly Update on Economic Indicators said the margins of decrease more than balanced the recent petrol, paraffin and newspaper price increases.

Overall, month-on-month inflation fell to 0.2 per cent from 2.1 per cent in May, while overall average inflation was also lower at 5.2 per cent from 5.7 per cent.

The CBK said it was hoping for further inflation decreases in the coming months supported by improvements in food supply and a tighter monetary regime.

As largely expected, banks took the cue from Standard Chartered and started raising their base rates in response to an upward trend in the indicative 91-day Treasury Bill rate that has held for over two months now. The sustained increase has been attributed to highly priced buyer bids.

Average base rates in the industry increased from 17.74 to 17.79 per cent as the yield rate on the 91-day tenor T-Bill went up from 12.78 to 12.80 per cent.

Increased supply in the inter-bank overnight borrowing market saw interest rates drop to 10.66 per cent from 10.70.

Meanwhile, the Kenyan shilling lost ground to the US dollar to exchange at a weekly average of Sh79.11 against Sh79.97, the previous level. However, the currency had staged a recovery towards the end of last week to stand at Sh79 and test the 78.50 level on the back of low dollar demand and anticipated inflows from tea exports.

It opened in the Monday trading at Sh78.80 and was largely holding on at around this level yesterday.