UPDATE 1-Russian inflation stable but set to rise

* CPI stays at +3.7 pct in March, a post-Soviet low

* Utility price freeze, harvest effect, to wear off in H2

* Rising price pressures point to steady interest rates (Adds context and analyst comments)

By Jason Bush

MOSCOW, April 4 (Reuters) - Headline Russian inflation held steady at a record post-Soviet low in March, data showed, but is projected to rise later in the year as gas and power price hikes kick in and base effects disappear.

Consumer prices rose 3.7 percent year-on-year, unchanged from February when inflation hit a record post-Soviet low, the Federal Statistics Service said on Wednesday. Month on month inflation rose to 0.6 percent from 0.4 percent.

March's low reading was expected following a freeze on household utility bills at the beginning of the year ahead of the March 4 presidential election won by Prime Minister Vladimir Putin.

Russia is also still benefiting from the effects of a relatively good harvest last year - following a poor one in 2010 - a statistical base effect that will also wear off during the course of the year.

"This is basically the floor for year-on-year inflation, because headline inflation has been benefiting from strong positive base effects," said Alexander Morozov, chief economist at HSBC in Moscow.

The indexation of utility prices will take place in July, which is expected to fuel inflation in the second half of this year.

Analysts surveyed by Reuters last month forecast inflation would reach 6.7 percent by the end of 2013 - above the central bank's target of between 5 and 6 percent.

In a recent report, Goldman Sachs said that its measure of core inflation - an indicator that excludes non-processed food, regulated prices and petrol - is running at 7.4 percent, double the headline rate and rising.

"The task of getting to 5-6 percent inflation is a very tough one - even though we have 3.7 percent inflation now. The economy doesn't have any spare capacity," said Clemens Grafe, chief economist for Russia at Goldman Sachs in Moscow.

He said rapidly rising consumption, fuelled largely by higher government expenditure ahead of the March election, means spending is in danger of running ahead of the economy's ability to produce, causing inflationary bottlenecks.

The underlying pressures mean Russia's central bank is unlikely to cut interest rates in the near future.

On Tuesday, central bank first deputy chairman Alexei Ulyukaev signalled that the bank would keep rates on hold at its monthly policy meeting next week, reiterating its view that current rates balances growth concerns with inflationary risks.

NOTE - For key Russian indicators click here. (Writing by Jason Bush, additional reporting by Andrey Ostroukh; Editing by John Stonestreet)