The incoming information that has become available since the Governing Council's monetary policy meeting in September, while somewhat weaker than expected, remains overall consistent with an ongoing broad-based expansion of the euro area economy and gradually rising inflation pressures. The risks surrounding the euro area growth outlook can still be assessed as broadly balanced. At the same time, risks relating to protectionism, vulnerabilities in emerging markets and financial market volatility remain prominent. Yet, the underlying strength of the economy continues to support the Governing Council's confidence that the sustained convergence of inflation to its aim will continue in the period ahead and will be maintained even after a gradual winding-down of the net asset purchases. Nevertheless, significant monetary policy stimulus is still needed to support the further build-up of domestic price pressures and headline inflation developments over the medium term. This support will continue to be provided by the net asset purchases until the end of the year, by the sizeable stock of acquired assets and the associated reinvestments, and by the Governing Council's enhanced forward guidance on the key ECB interest rates. In any event, the Governing Council stands ready to adjust all of its instruments as appropriate to ensure that inflation continues to move towards its aim in a sustained manner.
Survey indicators of global economic growth have weakened recently as the global economic cycle matures. The global trade momentum has moderated amid ongoing actions and threats regarding trade tariff increases by the United States and possible retaliation by affected countries, but the near-term outlook remains steady. Global financial conditions remain supportive for advanced economies, while creating headwinds for emerging market economies.
In the euro area, sovereign bond yields have risen amid an increase in global risk-free rates and rising tensions in the sovereign debt markets of some euro area countries. Euro area equity prices have declined, reflecting a deterioration in risk sentiment. By contrast, yield spreads on corporate bonds have remained broadly unchanged. In foreign exchange markets, the euro has been broadly stable in trade-weighted terms.
Euro area real GDP increased by 0.4%, quarter on quarter, in both the first and the second quarter of 2018. Looking ahead, the incoming information remains overall consistent with the Governing Council's baseline scenario of an ongoing broad-based economic expansion. However, some recent sector-specific developments are having an impact on the near-term growth profile. The ECB's monetary policy measures continue to underpin domestic demand. Private consumption is fostered by ongoing employment growth and rising wages. Business investment is supported by solid domestic demand, favourable financing conditions and corporate profitability. Housing investment remains robust. In addition, the expansion in global activity is expected to continue supporting euro area exports, though at a slower pace.
Euro area annual HICP inflation increased to 2.1% in September 2018, from 2.0% in August, reflecting mainly higher energy and food price inflation. On the basis of current futures prices for oil, annual rates of headline inflation are likely to hover around the current level over the coming months. While measures of underlying inflation remain generally muted, they have been increasing from earlier lows. Domestic cost pressures are strengthening and broadening amid high levels of capacity utilisation and tightening labour markets. Looking ahead, underlying inflation is expected to pick up towards the end of the year and to increase further over the medium term, supported by the ECB's monetary policy measures, the ongoing economic expansion and rising wage growth.
The monetary analysis shows that broad money (M3) growth stood at 3.5% in September 2018, after 3.4% in August. The growth of loans to the private sector has strengthened further, continuing the upward trend observed since the beginning of 2014. The euro area bank lending survey for the third quarter of 2018 indicates that loan growth continues to be supported by increasing demand across all loan categories and favourable bank lending conditions for loans to enterprises and loans for house purchase.
Combining the outcome of the economic analysis with the signals coming from the monetary analysis, the Governing Council concluded that an ample degree of monetary accommodation is still necessary for the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term.
On the basis of this assessment, the Governing Council decided to keep the key ECB interest rates unchanged and continues to expect them to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2% over the medium term. Regarding non-standard monetary policy measures, the Governing Council confirmed that the Eurosystem will continue to make net purchases under the asset purchase programme (APP) at the new monthly pace of €15 billion until the end of December 2018. The Governing Council anticipates that, subject to incoming data confirming its medium-term inflation outlook, net purchases will then end. The Governing Council intends to reinvest the principal payments from maturing securities purchased under the APP for an extended period of time after the end of the net asset purchases, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation.