Turkey’s annual consumer price inflation rate moved up from 15.39% in June to 15.85% in July, marking the highest level recorded since 2003, the Turkish Statistical Institute (TUIK) announced on August 3.

Markets, however, had expected as much as 16.3% for July, according to a survey by BloombergHT.  The better-than-expected inflation number put something of a brake on the descent of the collapsing Turkish lira (TRY), but the currency nevertheless recorded a fresh record low on August 3, weakening to 5.1154 against the USD before TUIK released the consumer pricing data. Despite the market support provided by the inflation data, the TRY was trading at 5.08 levels, a decline of around 0.3% d/d, as the market moved towards its close.

Turkish President Recep Tayyip Erdogan’s son-in-law and newly-appointed finance and treasury minister Berat Albayrak continued to make comments that rub up against orthodox economy theory in a televised interview he gave after the inflation rate was announced.

“Turkey won’t step back from price stability and growth,” Albayrak said.

“Not sure at this stage you can have both—he faces difficult choices. You cannot have your Turkish delight and eat it,” Timothy Ash of Bluebay Asset Management said of Albayrak’s desire to enjoy both growth and price stability at the same time.

“Headline CPI was better than expected, or the rate of deterioration slower, but both core and the PPI were higher than expected suggestive of strong underlying inflation pressures. This number is not going to let the CBRT [Central Bank of the Republic of Turkey] off the hook. The pressure is still on. The CBRT, and Albayrak, need to wake up and quickly to roll out some credible policy responses,” Ash added in a note.

“The US’s decision to impose sanctions on Turkey this week, as well as another bad inflation reading, has strengthened the case for further interest rate hikes. And there’s a growing risk of severe macroeconomic stress,” William Jackson of Capital Economics said in a research note.

“While the central bank faces pressure from the government not to do so, we think policymakers will ultimately tighten monetary conditions further. We expect another 200bp of hikes in the one-week repo rate,” Jackson also said. Capital Economics’ previous rate hike forecast was at 100bp, prior to the US sanctions directed at two Turkish ministers.

Turkey’s inflation rate jumped into the double digits in February 2017. Since then the rate has only once moved back into the single digits, in July last year and that was due to the base effect of an economic soft spot caused by the July 2016 failed coup.

After last November’s 12.98%, there was a slow descent to the March figure of 10.23% before the rate started to run rampant.

Annual food inflation rose further from 18.89% in June to 19.4% in July while annual inflation in transportation prices slightly slowed to 24.21% in the month from 24.26% in June.

Meanwhile, the deterioration in core inflation metrics and producer price inflation continued in July.

The annual rise in the C-index, one of the central bank’s favourite core inflation indicators, also hit a new record at 15.10%. The previous high was 14.60% seen in June.

Annual PPI rose again, moving up from 23.71% in June to 25% in July, the highest level seen since 2003, TUIK said in a separate statement.

The rate of annual PPI fell to 12.14% in January, the lowest level posted since December 2016—but it has skyrocketed since then in parallel with the depreciation in the lira.