Part two of Reuters interview with Medvedev

Following is the second part of translated excerpts from Reuters interview with Russian president Dmitry Medvedev, conducted earlier this week at the Kremlin:

REUTERS: You must be aware of the current economic downturn in the majority of the G8 states, while the situation in Russia is the reverse. What can you do to avoid the overheating of the economy and consequences of that, including inflation?

MEDVEDEV: As a matter of fact, overheating is present in most states. We are also closely watching not to allow overheating in our own economy....Nonetheless, inflationary processes are universal and today they are present in the majority of the world's economies.

We, in our turn, are trying to change this situation, without allowing the economy to overheat or causing any imbalance of macroeconomic proportions which could whip up inflation. I hope we will cope with these problems, because high inflation makes fully-fledged development of economic projects impossible, but what is the most delicate -- it deals a painful blow to our citizens' interests.

As for our relations with other states, I definitely feel that the system of regulating international financial ties, which has been lately in existence -- maybe for the past few decades -- has turned out not to be too efficient...

You can work your economic muscles to such an extent, that everything will be great at first, but if this economy reaches such a size that its crisis affects the international economic situation, this won't be already a problem of a single state, even if it is a very powerful state, this will be a global problem. And even understanding the cyclical nature of the development of the world's economy, one can smooth out these more difficult periods. We should simply cooperate on these issues. As far as I am aware, my colleagues from the other G8 states are also now preparing their proposals on this matter. And, maybe, this is a very important topic for discussion now....

REUTERS: Mr President, as far as Russia and Russia's economy are concerned, there is a problem: inflation is rising and spending is rising at the same time. How are you going to tackle this problem, are you going to cut spending, are you going to raise interest rates, or revalue the rouble ? What are you going to do to lower inflation in Russia?

MEDVEDEV: You have correctly noted the two trends. Actually, inflation has accelerated. We will definitely take measures -- and are taking already -- to bring it down. These include limits on excessive state spending. We should also influence the so-called monetary causes of inflation, and other, non-monetary factors that have an impact on inflation. The government worked out such a programme and it is being implemented now. As for the interest rate policy, of course we could not pursue interest rate policy in isolation from the general situation. It is determined both by the current level of inflation and the situation with international financial institutions. For instance, I mean the state of international financial liquidity. Because, as we see it, money now freely flows from one state into the other, depending on the interest rate policy pursued by the surrounding world. So we will adjust our interest rate policy, proceeding from this. But there must be no surprises here.

REUTERS: Talking of today, can you say clearly that Russia will have a soft landing ?...