Russia’s producer price index of inflation (PPI) has risen fast in the last few months on the back of rising oil costs and wage inflation to reach double digits.

PPI was 16% in July, slightly down from the 16.1% in June, but well up on the 5% it started the year at, reports Rosstat.

Consumer price inflation (CPI) has also started creeping up this year and was 2.5% in July, up slightly from a record low of 2.2% in January and 2.3% in June.

The recent devaluation of the ruble in the last few months caused by a combination of the Turkish lira crisis, and fears of new “crushing” sanctions being imposed by the US in the autumn have caused the ruble to slide to two year lows against the dollar that will feed through into inflation over the rest of this year.

CPI inflation is now expected to creep up closer to the current Central Bank of Russia (CBR) target rate of 4% and analysts say that further rate cuts this year (there are three CBR monetary policy meetings left) are not only unlikely but a rate hike is now on the cards. Adding to the inflationary pressure is a government decision over the summer to increase the VAT rate from 18% to 20%.

Rising inflation and possible rate hikes will have a knock on effect on growth which, while still being in positive territory, is now expected to come in slightly lower than anticipated at around 2%.

Thanks to the threat of new US sanctions, Russia has been put on an economic war footing in preparation for more possible shocks.