MOSCOW, Sept 8 (Reuters) - Russia"s annual inflation accelerated further in August towards levels last seen in 2016, data showed on Wednesday ahead of the central bank"s board meeting where it is widely expected to raise rates for the fifth time this year. Inflation is a sensitive issue in Russia as it overshot the central bank"s 4% target in late 2020 and shows no signs of slowing, eating into incomes already dented by the COVID-19 crisis and the weak rouble ahead of a September parliamentary election. Russia"s consumer price index (CPI) rose 6.68% in year-on-year terms in August, its sharpest increase since August 2016, after a 6.46% rise a month earlier, data from the federal statistics service Rosstat showed. Analysts polled by Reuters expected annual inflation to be at 6.6%, reflecting the weak rouble that filters into prices by making imports more expensive. To combat rising prices, the Russian central bank is set to increase the key interest rate by 50 basis points to 7% on Friday after a 100-basis-point hike in July, which would bring it above inflation for the first time so far this year, a Reuters poll suggested. Rate hikes affect inflation with a lag of a few quarters and are designed to tame rising prices by making borrowing more expensive and by increasing the appeal of keeping money at banks" deposits. The central bank expects inflation to end this year at 5.7-6.2%, before returning to 4.0-4.5% in 2022. Month on month, the CPI rose 0.17% in August, above the market consensus forecast for a 0.1% increase. In the week to Sept. 6, the CPI rose by another 0.07%, Rosstat said. Rosstat gave the following details: RUSSIAN CPI Aug 21 July 21 Aug 20 Mth/mth pct change +0.17 +0.31 -0.04 - food -0.51 -0.50 -0.77 - non-food +0.80 +0.77 +0.41 - services +0.32 +0.88 +0.37 Y/Y pct change +6.68 +6.46 +3.58 Core CPI y/y pct change +7.07 +6.78 +3.11 (Reporting by Andrey Ostroukh; Editing by Emelia Sithole-Matarise) Our Standards: The Thomson Reuters Trust Principles.