In 2018, inflation in the Philippines increased due to both supply and demand factors. Global commodity prices played a big role in driving up inflation, while non-oil trade deficits also contributed. Tighter monetary policy was needed to control inflation. The estimated output gap, which shows demand pressures, may have been larger because of the widening trade deficits. Delaying monetary policy adjustments can lead to higher inflation rates and require more aggressive interest rate hikes to bring inflation back down.