supporting bank lending to firms and households. let me now explain our assessment in greater detail, starting with the economic analysis. euro area real gdp contracted by 11. 8 percent, quarter on quarter, in the second quarter of 2020. following the trough in april 2020, the euro area economy rebounded strongly in the third quarter, making up about half of the contraction in the first half of the year. the significant surge in coronavirus infection rates and the associated intensification of containment measures since the summer constitute clear headwinds to the short - term outlook. in fact, recent hard data, survey results and high - frequency indicators point to a significant softening in economic activity in the final quarter of the year. moreover, economic developments continue to be uneven across sectors. in particular, activity in the services sector is slowing again as it is the sector most affected by the new restrictions on social activities and mobility. looking ahead, while the uncertainty related to the evolution of the pandemic will likely dampen the strength of the recovery in the labour market and in consumption and investment, the euro area economy should continue to be supported by favourable financing conditions and an expansionary fiscal stance. overall, the risks surrounding the euro area growth outlook are clearly tilted to the downside. this largely reflects the recent resurgence in covid - 19 infections, the associated intensification of containment measures and a highly uncertain timeline of the pandemic and its implications for economic and financial conditions. euro area annual inflation decreased to – 0. 3 percent in september, from – 0. 2 percent in august, reflecting developments in the prices of energy, non - energy industrial goods and services. on the basis of oil price dynamics and taking into account the temporary reduction in german vat, headline inflation is likely to remain negative until early 2021. moreover, near - term price pressures will remain subdued owing to weak demand, notably in the tourism and travel - related sectors, as well as to lower wage pressures and the appreciation of the euro exchange rate. once the impact of the pandemic fades, a recovery in demand, supported by accommodative fiscal and monetary policies, will put upward pressure on inflation over the medium term. marketbased indicators and survey - based measures of longer - term inflation expectations remain broadly unchanged at low levels. turning to the monetary analysis, broad money ( m3 ) growth rose to 10. 4 percent in september 2020, from 9. 5 percent in august, thus remaining well above the levels

this will foster the convergence of inflation towards its aim in a sustained manner, in line with its commitment to symmetry. in the meantime, we decided to reconfirm our accommodative monetary policy stance. we will keep the key ecb interest rates unchanged. we expect them to remain at their present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2 percent within our projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics. we will continue our purchases under the pandemic emergency purchase programme ( pepp ) with a total envelope of €1, 350 billion. these purchases contribute to easing the overall monetary policy stance, thereby helping to offset the downward impact of the pandemic on the projected path of inflation. the purchases will continue to be conducted in a flexible manner over time, across asset classes and among jurisdictions. this allows us to effectively stave off risks to the smooth transmission of monetary policy. we will conduct net asset purchases under the pepp until at least the end of june 2021 and, in any case, until the governing council judges that the coronavirus crisis phase is over. we will reinvest the principal payments from maturing 1 / 3 bis central bankers'speeches securities purchased under the pepp until at least the end of 2022. in any case, the future roll - off of the pepp portfolio will be managed to avoid interference with the appropriate monetary policy stance. net purchases under our asset purchase programme ( app ) will continue at a monthly pace of €20 billion, together with the purchases under the additional €120 billion temporary envelope until the end of the year. we continue to expect monthly net asset purchases under the app to run for as long as necessary to reinforce the accommodative impact of our policy rates, and to end shortly before we start raising the key ecb interest rates. we intend to continue reinvesting, in full, the principal payments from maturing securities purchased under the app for an extended period of time past the date when we start raising the key ecb interest rates, and in any case for as long as necessary to maintain favourable liquidity conditions and an ample degree of monetary accommodation. we will also continue to provide ample liquidity through our refinancing operations. in particular, our third series of targeted longer - term refinancing operations ( tltro iii ) remains an attractive source of funding for banks,