Inflation in the Philippines is often driven by factors beyond the direct control of the Bangko Sentral ng Pilipinas

06 Feb 2026

Inflation is a persistent economic concern that affects everyone in the Philippines, especially the poor. This study looks at what has been driving inflation in the country from 2001 to 2024 by separating it into two parts: supply-side factors (like oil prices, rice shortages, and global shocks) and demand-side factors (like consumer spending and economic growth). Using a simple method and official data on prices and household consumption, I found that the biggest inflation episodes—especially in 2008, 2018, and 2022—were mainly caused by supply-side issues. These include oil price spikes, tax hikes, and problems in the rice supply. The study also shows that supply-driven inflation reacts more strongly to shocks such as oil price increases or rising interest rates abroad. In contrast, demand-driven inflation doesn’t move as much in response.

This has major implications for policymaking. Traditionally, central banks like the Bangko Sentral ng Pilipinas rely on interest rate adjustments to fight inflation. But if inflation is largely caused by supply problems, monetary policy alone is not enough. The findings emphasize the need for broader government action—such as improving logistics, stabilizing food and energy supplies, and ensuring better coordination across agencies.

Another key contribution of this research is methodological. Instead of relying on complex structural models or indirect measures like output gaps, the study uses a more transparent and practical approach based on observable price and quantity data. This makes the method not only easier to apply in real-time but also more useful in developing country settings where data and modeling capacity may be limited.

The key message is that inflation in the Philippines is often caused by things beyond the Bangko Sentral’s control. So while adjusting interest rates remains important, government efforts to ease supply constraints—like stabilizing food and energy supply and improving transport systems—are just as crucial. This kind of inflation tracking gives policymakers a clearer picture of what’s going on and helps them respond better.

Author: Jan Carlo B. Punongbayan (School of Economics, University of the Philippines Diliman)

Read the full paper: https://doi.org/10.1080/13504851.2025.2487241

Image by Ruth Bolaño from Pexels

Inflation in the Philippines is often driven by factors beyond the direct control of the Bangko Sentral ng Pilipinas

Inflation is a persistent economic concern that affects everyone in the Philippines, especially the poor. This study looks at what has been driving inflation in the country from 2001 to 2024 by separating it into two parts: supply-side factors (like oil prices, rice shortages, and global shocks) and demand-side factors (like consumer spending and economic growth). Using a simple method and official data on prices and household consumption, I found that the biggest inflation episodes—especially in 2008, 2018, and 2022—were mainly caused by supply-side issues. These include oil price spikes, tax hikes, and problems in the rice supply. The study also shows that supply-driven inflation reacts more strongly to shocks such as oil price increases or rising interest rates abroad. In contrast, demand-driven inflation doesn’t move as much in response.

This has major implications for policymaking. Traditionally, central banks like the Bangko Sentral ng Pilipinas rely on interest rate adjustments to fight inflation. But if inflation is largely caused by supply problems, monetary policy alone is not enough. The findings emphasize the need for broader government action—such as improving logistics, stabilizing food and energy supplies, and ensuring better coordination across agencies.

Another key contribution of this research is methodological. Instead of relying on complex structural models or indirect measures like output gaps, the study uses a more transparent and practical approach based on observable price and quantity data. This makes the method not only easier to apply in real-time but also more useful in developing country settings where data and modeling capacity may be limited.

The key message is that inflation in the Philippines is often caused by things beyond the Bangko Sentral’s control. So while adjusting interest rates remains important, government efforts to ease supply constraints—like stabilizing food and energy supply and improving transport systems—are just as crucial. This kind of inflation tracking gives policymakers a clearer picture of what’s going on and helps them respond better.

Author: Jan Carlo B. Punongbayan (School of Economics, University of the Philippines Diliman)

Read the full paper: https://doi.org/10.1080/13504851.2025.2487241

Image by Ruth Bolaño from Pexels