the governing council ’ s inflation aim in a sustained manner. let me now explain our assessment in greater detail, starting with the economic analysis. euro area real gdp increased by 0. 4 %, quarter on quarter, in both the first and the second quarter of 2018. incoming information, while somewhat weaker than expected, remains overall consistent with our baseline scenario of an ongoing broad - based economic expansion, supported by domestic demand and continued improvements in the labour market. some recent sectorspecific developments are having an impact on the near - term growth profile. our monetary policy measures continue to underpin domestic demand. private consumption is fostered by ongoing employment growth and rising wages. at the same time, 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. 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. 1 / 2 bis central bankers'speeches 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 our monetary policy measures, the ongoing economic expansion and rising wage growth. turning to the monetary analysis, broad money ( m3 ) growth stood at 3. 5 % in september 2018, after 3. 4 % in august. apart from some volatility in monthly flows, m3 growth is increasingly supported by bank credit creation. the narrow monetary aggregate m1 remained the main contributor to broad money growth. the growth of loans to the private sector strengthened further, continuing the upward trend observed since the beginning of 2014. the annual growth rate of loans to non - financial corporations rose to 4. 3 % in september 2018, from 4. 1 % in august, while the annual growth rate of loans

a whole. though our credit operations and risk mitigation measures are in some ways similar to collateralised lending operations by commercial banks, 1 the financial assets we take as collateral and the lending rate we set are the same for all borrowers. that, in turn, requires a risk control framework which aims to achieve risk equivalence across all assets accepted as collateral. second, our primary goal is to maintain price stability. so, unlike commercial banks whose fiduciary responsibility is to maximise their financial income, central banks have to consider the wider macroeconomic picture when they set their risk management frameworks. this is why central banks ’ exposure to financial risks can – and may indeed have to – increase in 1 / 4 bis central bankers'speeches order to honour their mandates, while commercial banks typically aim to reduce risks during crises. in exceptional times, central banks may need to take more risk on their own balance sheets so as to reduce risks for the financial system as a whole. this contributes to financial stability and, ultimately, to price stability. still, this is not to say that managing financial risks is not important for implementing the eurosystem ’ s monetary policy. quite the opposite, in fact! just as a commercial bank must comply with its regulations, a central bank must follow its mandate and the risk management principles therein. 2 for us at the ecb, these principles, which were established long before we embarked on non - conventional policies, underpin all our policy measures. broadly speaking, the principles are protection, consistency, simplicity and transparency. they imply that – if there are several monetary policy options that we can take to fulfil our mandate – we should select the measures that minimise our own exposure to financial risks. this idea, which underpins all risk management ( including in commercial banking ), is known as risk efficiency. in addition, our principles require risk management to be an integral part of our decision - making. and we embody transparency and simplicity by being rules - based and as predictable as possible in our operations. this commitment to risk efficiency is vital for several reasons. first, central bank revenues are public funds, meaning any losses by central banks are losses for the public purse in each euro area country. second, losses can affect the financial independence of central banks and therefore, potentially, their operational independence. third, losses can harm our credibility and reputation in the eyes of the public, and thus their confidence in the central bank to maintain price stability. for these