Russia's economy is overheating, the finance minister warned

Signals are emerging that Russia's economy is overheating, Russian Finance Minister Anton Siluanov has warned. So other fiscal stimuli can be counterproductive. "If we continue to increase spending, what will come? Overheating. We are already seeing the basis of overheating - high inflation," Siluanov told the International Economic Forum in St. Petersburg. The annual growth rate of consumer prices rose to 5.9% in May from 5.5% in April, with the central bank's inflation target set at 4%. Russia's central bank governor Elvira Nabiullin said in an interview with CNBC this week that inflation is accelerating and that, unlike other regions in Russia, this is not just a temporary phenomenon. "It's different here. We think that inflationary pressures in Russia are not temporary, they are not just temporary. We see more permanent factors, monetary factors, so we have started to raise interest rates back to a neutral setting," Nabiullina said. Russia's central bank first surprised markets in March and unexpectedly raised its key interest rate by a quarter of a percentage point to 4.50 percent. It continued to tighten monetary policy in May, when the key rate rose to five percent. Investors are now waiting for the next meeting of the Monetary Committee, which will take place on June 11. It is speculated that the central bank could increase the key interest rate by up to 50 basis points. Russia's central bank said on Wednesday that the domestic economy continued to grow in the second quarter and that gross domestic product could reach pre-pandemic levels by mid-year.