INFLATION

Ernison Rio
Don Acuña
Memes Del Rosario Dichosa
Jeth Bustamante
Jonas Doria
JP Guarin Marcellana
Leo Alfar
What is INFLATION?
• an ongoing rise in the general level of prices of goods and
services in an economy over a period of time

• upward movement in price

Measuring INFLATION
• CONSUMER PRICE INDEX- total cost of purchasing a
market basket bought by a typical household consumer
during a period of time
SAMPLE TABLE
Measuring INFLATION cont’d
• INFLATION RATE- annualized percentage change in the
general price index

RESULTS FROM PREVIOUS

EXAMPLE

X 100 = 62%
Demand-pull inflation
• Also known as inflationary gap inflation
• It occurs because quantity demanded is greater than
quantity supplied which tends to increases prices. The
demand-side is pulling prices up with increased incomes
and/or a change in consumer preferences.
Demand-pull Inflation
Cost-push inflation
• Is a rise in the general level of prices resulting from an
increase in the cost of production.
• Example: Increase in the prices of oil products results in
an increase in the cost of production of goods and
services.
HARMFUL EFFECTS OF INFLATION
• ALTERS THE OUTCOMES OF LONG-TERM PROJECTS

• INFLATION DISTORTS INFORMATION DELIVERED BY

PRICES

• PEOPLE TRY TO PROTECT THEMSELVES FROM

INFLATION
CORE INFLATION &
HEADLINE INFLATION
Core Inflation
• an inflation measure which excludes transistory or
temporary price volatility as in the case of some
commodities such as food items, energy products etc. It
reflects the inflation trend in an economy
• Used as an Indicator of the long term inflation trend and as
an indicator of future inflation.
Headline Inflation
• is a measure of the TOTAL inflation within an economy ,
including commodities such as food and energy prices
(e.g., oil and gas), which tend to be much more volatile
and prone to inflationary spikes.
 • Exclusion Method - computes core inflation by
taking out the prices of a fixed, pre-specified set of
Measuring Core items from the CPI basket. The Excluded
Inflation components are considered to be either volatile or
susceptible to supply disturbances and typically
There are several consist of food and energy items.
methods used to compute
Core inflation. • Statistically-Based Methods - removes extreme or
outlier price changes (both positive and negative)
from the overall inflation rate.
• Econometric techniques - to estimate core
inflation by estimating or calculating a statistical
relationship between inflation and other economic
variables.
Core Inflation in the Philippines
• The core inflation in the Philippines is defined as the rate
of change of headline CPI after excluding selected food
and energy items.
• The exclusion method was chosen because it is easier to
understand compared to other methodologies, more
transparent and easier to compare using the CPI data.
PHILIPPINES INFLATION RATE 2019