##tat, nipe and ecb staff calculations. notes : all series are de - meaned. historical decompositions are based on a vector autoregression including a bottleneck proxy, oil prices, hicp neig, producer prices, industrial production, and export and import volumes. the bottleneck and oil price shock are identified using short - run restrictions averaged across all possible orderings of the bottleneck and oil price series. as a bottleneck proxy, a pmi supply shock is estimated from a separate vector autoregression including pmi output and supply delivery times and identified via sign restrictions. gas prices are not explicitly included in the model, but oil prices are highly correlated with gas prices and thus capture a major part of the energy shock. the latest observations are for february 2022. chart 21 decomposition of services inflation ( percentage points ) sources : eurostat and ecb staff calculations. notes : decomposed with non - constant weights. the column on the left shows the average contributions. the latest observations are for february 2022. in comparing inflation dynamics across regions, chart 22 shows that the increase in core inflation has been much higher in the united states relative to the euro area. two basic factors behind this are the larger contribution from supply bottlenecks to inflation and the higher levels of domestic demand in the united states, which is shown in chart 23. chart 22 inflation excluding food and energy : euro area ( left ) vs. united states ( right ) ( annual percentage changess ) sources : eurostat, haver and ecb staff calculations. notes : for the euro area, the panel shows the hicp excluding food and energy, as well as the contributions to it. for the united states the panel shows the cpi excluding food and energy, as well as the contributions to it. items affected by bottlenecks include new motor cars, second - hand motor cars, spare parts and accessories for personal transport equipment, and furnishings and household equipment. items affected by reopening include clothing and footwear, recreation and culture, recreation services, hotels and motels, and domestic and international flights. rents include actual rents paid by tenants, and for the united states also imputed rents for owner - occupied housing. the latest observations are for february 2022 for core cpi and the contributions in the united states and hicp excluding food and energy in the euro area, otherwise january 2022. chart 23 real consumption expenditure : euro area ( left ) vs. united states ( right

adverse impact of the pandemic on the projected inflation path. as recently emphasised by president lagarde, flexibility is a special principle for conducting monetary policy in a monetary union, as we must continually focus on ensuring that policy is transmitted evenly to all parts of the euro area. [ 13 ] with diverging initial conditions, exogenous shocks can affect economies asymmetrically. if this leads to financial fragmentation, the transmission of monetary policy can be disrupted. the pandemic was a particularly extreme exogenous shock and the pepp has shown that, under stressed conditions, flexibility in the design and conduct of asset purchases has helped to counter the impaired transmission of monetary policy and made the governing council ’ s efforts to achieve its goal more effective. within the governing council ’ s mandate, under stressed conditions, flexibility will remain an element of monetary policy whenever threats to monetary policy transmission jeopardise the attainment of price stability. this means that we are ready to use a wide range of instruments to address fragmentation. one application of the flexibility principle relates to the reinvestment of the pepp portfolio. in particular, in the event of renewed market fragmentation related to the pandemic, pepp reinvestments can be adjusted flexibly across time, asset classes and jurisdictions at any time. this could include purchasing bonds issued by the hellenic republic over and above rollovers of redemptions in order to avoid an interruption of purchases in that jurisdiction, which could impair the transmission of monetary policy to the greek economy while it is still recovering from the fallout from the pandemic. net purchases under the pepp could also be resumed, if necessary, to counter negative shocks related to the pandemic. another application of the flexibility principle during the pandemic took the form of a set of collateral easing measures. in providing a timeline for the gradual phasing out of these measures, the governing council last week also noted that it “ reserves the right to deviate also in the future from credit rating agencies ’ ratings if warranted, in line with its discretion under the monetary policy framework, thereby avoiding mechanistic reliance on these ratings. ” more generally, as noted by president lagarde in her recent speech, the flexibility principle means that we are ready to deploy a wide range of instruments to address fragmentation. 1. these remarks draw on lane, p. r. ( 2021 ), “ the monetary policy response in the euro area ”, in english, b.