UPDATE 1-Russian inflation to fall from 5.8% peak in April, but slowdown likely gradual -

(Adds GDP detail, budget background)

MOSCOW, April 14 (Reuters) - Inflation in Russia is likely to fall from its 5.8% peak in April, but a further slowdown could be gradual, the central bank said in a report on Wednesday.

The bank said upward pressure on consumer prices was persisting due to rising costs. Russia’s consumer price index (CPI) hit its highest since late 2016 in March.

Rising inflation and high inflationary expectations prompted the central bank to embark on a monetary tightening cycle last month, raising its key rate to 4.5%.

The next interest rate-setting meeting is on April 23.

Russia’s economy shrank by 3% in 2020, as the coronavirus pandemic paralysed business activity and prices for oil, Russia’s major export, plummeted.

The central bank expects the economy to rebound to pre-crisis levels by the end of the year. Its analysts estimate first-quarter growth of 0.8-0.9% in quarter-on-quarter terms, Wednesday’s report said.

The bank said growth continued in March, but the recovery phase had likely passed, implying a slower rate of expansion for the remainder of the year.

Hit hard by recent talk of new U.S. sanctions but coupled with strong oil prices, Russia’s rouble, despite bearing inflationary risks, is helping budget revenues.

Analysts polled by Reuters on Wednesday estimate that the rouble is now some 6% weaker than its fair value seen at around 71 versus the U.S. dollar.

On Monday, preliminary data from the finance ministry showed that Russia ran a budget surplus of just over 205 billion roubles ($2.71 billion) in the first quarter of 2021, another positive sign for the economy.

$1 = 75.5900 roubles Reporting by Elena Fabrichnaya; Writing by Alexander Marrow; Editing by Hugh Lawson and Toby Chopra