prices, which grew at an annual rate of 5. 4 % in april. the announced changes in indirect taxes will also have a bearing on inflation next year. this outlook for inflation is also reflected in the june 2006 eurosystem staff projections, which foresee annual hicp inflation in a range between 2. 1 % and 2. 5 % in 2006, and between 1. 6 % and 2. 8 % in 2007. compared with the march 2006 ecb staff projections, these ranges embody a slightly higher baseline profile for hicp inflation in 2006, largely reflecting the assumption of higher oil prices. this outlook for price developments remains subject to upside risks including further increases in oil prices, a stronger pass - through of past oil price rises to consumer prices than currently anticipated, additional increases in administered prices and indirect taxes, and – more fundamentally – stronger than expected wage developments due to second - round effects of past oil price increases. turning to developments in monetary aggregates and credit, liquidity in the euro area remains ample by all reasonable measures. the annual growth rate of m3 increased to 8. 8 % in april 2006, from 8. 5 % in march 2006, supported by the robust expansion of its most liquid components. credit growth has also remained very strong, with the annual rate of growth of loans to the private sector standing at double - digit levels. the rapid rate of monetary growth continues to be driven mainly by the expansion of its most liquid components. thus, the latest developments confirm that the stimulative impact of the low level of interest rates remains the dominant factor behind the current high trend rate of monetary expansion, which signals inflationary risks over the medium to longer term. the further acceleration of monetary and credit growth in this environment of already ample liquidity points to increased upside risks to price stability at longer horizons. monetary developments therefore require careful monitoring, in particular in the context of continued strong dynamics in housing markets. to sum up, annual hicp inflation rates are projected to remain elevated in 2006 and 2007, mainly as a consequence of upward pressures from high oil prices and indirect taxes. risks to this outlook for inflation remain on the upside. against the backdrop of strong monetary and credit growth and the ample liquidity situation, the cross - checking of the outcome of the economic analysis with that of the monetary analysis confirms that upside risks to price stability over the medium to longer term prevail. on 8 june 2006 the ecb ’ s governing council increased the key ecb interest rates by

. the new series of targeted longer - term refinancing operations ( tltro - ii ) are also providing additional stimulus by allowing banks to secure long - term funding under very attractive conditions, which they can pass on to their customers. in terms of quantities, bank lending to the private sector has been gradually recovering since early 2014. in the latest bank lending survey, banks continued to report that the ecb ’ s asset purchase programme ( app ) and the negative deposit facility rate had contributed to more favourable terms and conditions on loans, and are supporting lending volumes. 2 meanwhile, other survey data indicate improvements in the availability of external sources of financing for smes. 3 1 / 3 bis central bankers'speeches corporate bond issuance has also picked up since the announcement of the cspp in march, while the tltro - ii should help to further support bank lending volumes to the non - financial private sector. so our policy measures are clearly effective and are trickling down to the funding rates that matter most for the real economy, such as the ones faced by smes, which provide jobs for around two - thirds of those in employment in the euro area. 4 favourable financing conditions, along with other factors such as employment gains and improvements in the demand outlook, are expected to further support private consumption and investment expenditure going forward. investment however remains well below its pre - crisis levels and its sensitivity to the borrowing conditions faced by companies is lower than historical norms. according to the september ecb staff macroeconomic projections, annual real gdp growth is expected to increase by 1. 7 % this year, and by 1. 6 % in each of the next two years. turning to price developments, headline inflation increased in october to 0. 5 % in year - on - year terms, owing to a continued increase in annual energy inflation. so although price dynamics are improving, inflation remains at low levels – far below the level which we consider consistent with our price stability objective – reflecting past declines in oil prices and weak wage growth. underlying inflation in particular has yet to show clear signs of a more dynamic upward movement. the annual rate of hicp inflation excluding food and energy has hovered around 0. 8 % for the last three months as domestic cost pressures remain fundamentally weak. yet, as the effect of past oil price declines fades, annual hicp inflation is expected to pick up from 0. 2 % this year to 1. 2 % in 2017. moreover, we expect that as the recovery continues and economic