* Central bank hikes all key policy rates by 25 basis points
* Cites inflation overshoot, mid-term risks, for move
* Monetary drivers, one-off factors, push up inflation
* Russia hikes as other emerging markets ease
By Jason Bush
MOSCOW, Sept 13 (Reuters) - Russia's central bank raised all of its key interest rates by a quarter point on Thursday, in a surprise move that reflected its concern about inflation after consumer price growth overshot its 6 percent target.
The move bucks the trend in other major economies where weak growth is putting pressure on central banks to keep rates low, or else cut them - as the fellow BRIC countries Brazil, India and China have all done recently.
It reinforces how Russia is in many ways facing different challenges from those preoccupying western policy makers, on a day when the U.S. Federal Reserve endorsed a third round of bond buying to pump money into the economy.
Although Russia is also battling an economic slowdown, its policy makers are presently more concerned by rising prices, which mean the central bank is in danger of failing to meet its inflation target of 5-6 percent for 2012.
Annual inflation was running at around at 6.3 percent in mid-September, exceeding the year-end target for 2012.
"The decision was made in view of prices and inflation expectations growth, which increases the risks of exceeding the medium-term inflation targets of the Bank of Russia," the bank said after its monthly policy meeting.
The across-the-board increase takes the refinancing rate to 8.25 percent, the one-day fixed repo rate to 6.5 percent, and the overnight deposit rate to 4.25 percent.
The central bank is gradually shifting its focus away from managing the exchange rate to formal inflation targeting.
"From the point of view of market indicators, the central bank did everything correctly," said Nikolai Podguzov, analyst at VTB Capital. "The logic of inflation targeting prescribes this action."
Clamping down on inflation is also an important political goal in a country where rising prices are among the biggest public concerns, especially among elderly voters who are core supporters of President Vladimir Putin.
A majority of analysts had nevertheless expected the central bank to leave rates on hold this month, although it has hinted in recent months that a rise was possible.
"I am very much surprised," said Ivan Tchakarov, chief economist for Russia and the CIS at Renaissance Capital in Moscow. "You should be increasing rates when the economy is overheating, but not when there is a supply shock - the bad harvest - in particular when they are facing an economic slowdown in the second half of the year."
Economists have been divided over the correct course for interest rates. Some had said before the decision that a failure to raise rates could be seen as a concession to business lobbies who benefit from cheaper lending and a weaker rouble.
"Since the central bank's job is to address the long-term inflation trend and inflation expectations, they have to react to the increase in inflation expectations that has taken place," said Alexander Morozov, chief Russia economist at HSBC, who had expected the central bank to raise key policy rates.
"Other economists were paying too much attention to base effects and food price inflation ... They underestimated the increasing role of monetary factors in how inflation is being driven."
The central bank noted core inflation had gradually accelerated to 5.5 percent in August and played down recent signs of a slowdown in Russia's economy - a factor that many economists had believed would lead it to resist rate rises.
The central bank noted that while growth in investment and retail sales decelerated in July - the most recent data - industrial output is recovering, producer confidence remains fairly strong, the labour market is tight and credit growth high.
Some analysts nevertheless believe that the central bank has underestimated the downside risks.
"It seems to me that this is an incorrect decision," said Anton Stuchenevsky, economist at Troika Dialog, "...which may negatively impact economic growth."
Analysts said the surprise hike would be bullish for the rouble and bonds, but negative for stocks, increasing borrowing costs and weighing on economic growth.
Higher interest rates in Russia increase the attraction of carry trades, whereby investors use low-yielding currencies such as the dollar to buy instruments offering higher returns.
The central bank's determination to reduce inflation may also boost the real return on rouble investments.
"This is not a negative event for Russian bonds, rather it's a strong signal that the priority will be to address inflation," said Elena Kolchina, head of fixed income at Renaissance Asset Managers.
The benchmark MICEX stocks index was down 0.4 percent on the day while the rouble rallied, firming to 31.30 per dollar from 31.42 before the rate rise announcement.