* Market expects key rate to stay on hold at 4.25% this week
* Inflation could prompt c.bank to hike in Q2
* Bank of Russia to deliver decision at 1030 GMT on Friday
* Governor Elvira Nabiullina to present decision at 1200 GMT
MOSCOW, March 15 (Reuters) - Russia's central bank will keep
its key interest rate on hold on Friday and will prepare markets
for an imminent rate increase amid high inflation and lingering
geopolitical risks, a Reuters poll showed on Monday.
Russia cut rates to a record low in 2020 to prop up the
economy amid the COVID-19 pandemic and a drop in oil prices. But
as inflation accelerated, the central bank declared an end to
its monetary easing cycle last month.
Twenty-seven of the 28 analysts and economists polled said
the central bank would hold the key rate at 4.25%,
keeping the cost of lending unchanged since last July.
Inflation, the central bank's main remit, overshot the 4%
target a few months ago and reached 5.7% in February. The
central bank expects it to peak in March, driven in part by the
weaker rouble, which came under pressure from fears of fresh
Western sanctions against Moscow.
Central Bank Deputy Governor Alexei Zabotkin last week said
the normalisation of monetary policy, or bringing the key rate
to the 5-6% range, was possible sooner rather than later,
changing the market view over the timing of a possible rate
"The main intrigue is whether the CBR will surprise the
market by hiking the policy rate this Friday instead of waiting
for its core meeting, on 23 April," said Alexei Pogorelov, chief
economist at Credit Suisse, predicting an on-hold decision.
A February poll by Reuters showed the central bank was
expected to keep the key rate unchanged throughout 2021, while
the economy was set to grow by around 3%.
"We think the central bank will use its meeting on 19th
March to lay the groundwork for an interest rate hike in April,"
said Liam Peach of Capital Economics.
Sova Capital said the first hikes were possible in the
second quarter of 2021, with the key rate ending the year at
4.75% before reaching 5-6% in early 2022.
Sofia Donets, chief economist at Renaissance Capital who has
worked at the central bank in the past, said a rate hike was
possible in June.
The rate decision is due at 1030 GMT on Friday, followed by
an online media conference with Governor Elvira Nabiullina.
(Writing by Alexander Marrow and Andrey Ostroukh; Editing by