NAIROBI - Kenya's central bank held its benchmark lending rate at 10.5% on Tuesday, citing expectations that inflation would remain within its target band, its Monetary Policy Committee said.

Seven out of 10 analysts polled by Reuters had forecast that policymakers would hold the rate for a second time in a row, after hiking by 100 basis points in an off-cycle meeting in June to curb inflationary pressures.

"The MPC observed that non-food and non-fuel inflation was expected to decline, indicative of easing of underlying inflationary pressures," the committee said in a statement.

Year-on-year inflation edged up to 6.8% last month from 6.7% a month earlier after falls in some food commodities such as flour helped to blunt the impact of a 13% jump in retail energy prices.

The rate slipped below the government's preferred upper limit of 7.5% in June after remaining above it for a year.

The central bank said that the impact of the June hike was still being transmitted through the economy.

It revised its current account deficit forecast for the end of this year to 4.1% of GDP, from its initial expectation of 4.8%, thanks to rising export earnings and a drop in imports. The deficit was 5.1% of GDP at the end of last year.

(Reporting by Duncan Miriri and George Obulutsa; Editing by Alex Richardson)