* Russia hikes rate for 5th time in 2021 * Inflation at 5-yr peak of 6.74% * Cenbank targets inflation at 4% * Cenbank says key rate can go above 7% if needed (Adds detail, central bank and analyst quotes) MOSCOW, Sept 10 (Reuters) - Russia’s central bank raised its key interest rate to 6.75% on Friday, opting for a cautious step, but said that more rate increases are possible and the key rate could even exceed 7% as inflation remains stubbornly high. The central bank has been trying to get a grip on consumer inflation after it exceeded the target in late 2020, but monetary tightening was not enough to rein in rising prices boosted by global inflation and a weaker rouble. Contrary to the latest Reuters poll, which predicted the central bank would raise the rate by 50 basis points and say the monetary tightening was approaching the end, the bank lifted the rate by 25 basis points and sent a hawkish signal. “Should the situation develop in line with the baseline forecast, the Bank of Russia doesn’t rule out a possibility of a further rate hike at its next meetings,” Governor Elvira Nabiullina said, presenting the decision. “In order to return to inflation of 4%, more than one hike could be needed. In that regard, the signal has become more hawkish.” Inflation was at 6.74% as of Sept. 6, the central bank said, dropping the year-end inflation forecast, which earlier stood at 5.7%-6.2%. Nabiullina said the key rate can go above 7% and declined to comment on the timing of possible rate cuts in the future. “The balance of risks remains significantly shifted towards proinflationary ones,” the central bank said in a statement. Higher rates help tame consumer inflation by pushing up lending costs and increasing the appeal of bank deposits and are also supportive of the rouble. ING said risks of the key rate entering the 7.0%-7.5% range “are not negligible” now. “One final 25bpt rate hike this year will end the rate-hiking cycle at 7.00%, after which the CBR will stay put for about 6 months before initiating rate cuts,” Citi said. The next rate-setting meeting is scheduled for Oct. 22. (Reporting by Andrey Ostroukh; Additional reporting by Alexander Marrow, Elena Fabrichnaya, Anton Kolodyazhnyy, Darya Korsunskaya, Tatiana Voronova, Vladimir Soldatkin and Katya Golubkova; Editing by Steve Orlofsky) Our Standards: The Thomson Reuters Trust Principles.