ahead, the governing council expects real gdp growth to continue to expand at a moderate pace in 2010, owing to the ongoing process of balance sheet adjustment in various sectors and the expectation that low capacity utilisation is likely to dampen investment and that consumption is being hampered by weak labour market prospects. the governing council continues to view the risks to this outlook as broadly balanced, in an environment of uncertainty. on the upside, the global economy and foreign trade may recover more strongly than projected and confidence may improve more than expected. furthermore, there may be greater than anticipated effects stemming from the extensive macroeconomic stimulus being provided and from other policy measures taken. on the downside, concerns remain relating to renewed tensions in some financial market segments, a stronger or more protracted than expected negative feedback loop between the real economy and the financial sector, renewed increases in oil and other commodity prices, and the intensification of protectionist pressures, as well as the possibility of a disorderly correction of global imbalances. with regard to price developments, euro area annual hicp inflation was 1. 5 % in march 2010, according to eurostat ’ s flash estimate, after 0. 9 % in february. while no breakdown of overall hicp developments is available yet, this higher than expected outcome may be related in particular to the energy component as well as food prices, possibly partly as a result of weather conditions. inflation is expected to remain moderate over the policy - relevant horizon. in line with a slow recovery in domestic and foreign demand, overall price, cost and wage developments are expected to stay subdued. inflation expectations over the medium to longer term remain firmly anchored in line with the governing council ’ s aim of keeping inflation rates below, but close to, 2 % over the medium term. risks to this outlook remain broadly balanced. they relate, in particular, to further developments in economic activity and the evolution of commodity prices. furthermore, increases in indirect taxation and administered prices may be greater than currently expected, owing to the need for fiscal consolidation in the coming years. turning to the monetary analysis, the annual growth rate of m3 was – 0. 4 % in february. annual growth in loans to the private sector also remained weak, at – 0. 4 %, despite a positive flow in the month. overall, the latest data continue to support the assessment that the underlying pace of monetary expansion is moderate and that, in the medium term, the inflationary pressures associated with monetary developments are low. the growth of m3

overall. underlying inflation in the euro area is expected to continue to rise gradually over the medium term, supported by our monetary policy measures, the continuing economic expansion, the corresponding gradual absorption of economic slack and rising wage growth. turning to the monetary analysis, broad money ( m3 ) continues to expand at a robust pace, with an annual rate of growth of 5. 1 % in september 2017, after 5. 0 % in august. as in previous months, annual growth in m3 was mainly supported by its most liquid components, with the narrow monetary aggregate m1 expanding at an annual rate of 9. 7 % in september 2017, up from 9. 5 % in august. the recovery in the growth of loans to the private sector observed since the beginning of 2014 is proceeding. the annual growth rate of loans to non - financial corporations increased to 2. 5 % in september 2017, after 2. 4 % in august, while the annual growth rate of loans to households remained stable at 2. 7 %. the euro area bank lending survey for the third quarter of 2017 indicates that net loan demand has continued to increase for all loan categories. credit standards have further eased for loans to households, while they remained broadly unchanged for loans to enterprises. banks ’ overall terms and conditions on new loans have continued to ease for all categories of loans. the pass - through of the monetary policy measures put in place since june 2014 continues to significantly support borrowing conditions for firms and households, access to financing ‒ notably for small and medium - sized enterprises ‒ and credit flows across the euro area. to sum up, a cross - check of the outcome of the economic analysis with the signals coming from the monetary analysis confirmed the need to recalibrate the policy instruments to ensure the degree of monetary accommodation necessary to secure a sustained return of inflation rates towards levels that are below, but close to, 2 %. in order to reap the full benefits from our monetary policy measures, other policy areas must contribute decisively to strengthening the longer - term growth potential and reducing vulnerabilities. the implementation of structural reforms in all euro area countries needs to be substantially stepped up to increase resilience, reduce structural unemployment and boost euro area productivity and growth potential. regarding fiscal policies, all countries would benefit from intensifying efforts towards achieving a more growth - friendly composition of public finances. a full, transparent and consistent implementation of the stability and growth pact and of the macroeconomic imbalance procedure over time and across countries remains essential to increase the res