While the economies of the US and western Europe are rapidly cooling, much of the rest of the world is grappling with the opposite problem – overheating. Russia is a case in point. Spare capacity in the economy, which facilitated its rapid growth over the past decade, is now running out. The state statistics agency estimates that capacity utilisation in key sectors such as metals and chemicals has risen to more than 90 per cent. The squeeze on resources is spurring inflation, now running at about 14 per cent year-on-year. Food is the main culprit, but other prices are also rising. Reining in domestic demand will be tough. Nominal wage growth, according to Capital Economics, has hit 30 per cent year-on-year. The government is under increasing pressure to dole out some of the $160bn set aside from oil revenues. And the state already has big spending plans – $200bn, about a sixth of gross domestic product, has been earmarked for infrastructure projects during the next 10 years.

In an attempt to tame inflation, price controls have been imposed on key food items and tariffs set on wheat exports. But these distort the market. Monetary policy is also proving a blunt instrument. Russia’s large external surpluses have been difficult to absorb domestically. As a result, in spite of rises in official interest rates, interbank lending rates still run well below them and money supply and credit are both expanding rapidly. Meanwhile, the pressure on the currency means it is now at the top of its trading band. Allowing the ruble to appreciate is one of the few policy tools available to fight inflation, but the authorities, keen to protect exporters, are unwilling to let it rise further. Thailand, in 1997, discovered it could not combine free capital flows and a pegged currency, while controlling rates. A decade after the Asian crisis, governments from China to Russia are still trying to achieve the impossible.