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. 2 %, quarter on quarter, in the third quarter of 2018, following growth of 0. 4 % in the previous two quarters. the latest data and survey results have been weaker than expected, reflecting a diminishing contribution from external demand and some country and sector - specific factors. while some of these factors are likely to unwind, this may suggest some slower growth momentum ahead. at the same time, domestic demand, also backed by our accommodative monetary policy stance, continues to underpin the economic expansion in the euro area. the strength of the labour market, as reflected in ongoing employment gains and rising wages, still supports private consumption. moreover, business investment is benefiting from domestic demand, favourable financing conditions and improving balance sheets. residential investment remains robust. in addition, the expansion in global activity is still expected to continue, supporting euro area exports, although at a slower pace. this assessment is broadly reflected in the december 2018 eurosystem staff macroeconomic 1 / 3 bis central bankers'speeches projections for the euro area. these projections foresee annual real gdp increasing by 1. 9 % in 2018, 1. 7 % in 2019, 1. 7 % in 2020 and 1. 5 % in 2021. compared with the september 2018 ecb staff macroeconomic projections, the outlook for real gdp growth has been revised slightly down in 2018 and 2019. the risks surrounding the euro area growth outlook can still be assessed as broadly balanced. however, the balance of risks is moving to the downside owing to the persistence of uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility. according to eurostat ’ s flash estimate, euro area annual hicp inflation declined to 2. 0 % in november 2018, from 2. 2 % in october, reflecting mainly a decline in energy inflation. on the basis of current futures prices for oil, headline inflation is likely to decrease over the coming months. measures of underlying inflation remain generally muted, but domestic cost pressures are continuing to strengthen and broaden amid high levels of capacity utilisation and tightening labour markets, which is pushing up wage growth. looking ahead, underlying inflation is expected to increase over the medium term, supported by our monetary policy measures, the ongoing economic expansion and rising wage

2018 ), op. cit. [ 24 ] see gourinchas, p. - o. and rey, h. ( 2019 ), “ global real rates : a secular approach ”, bis working paper, no 793, bank for international settlements ; jorda, o. and taylor, a. m. ( 2019 ), “ riders on the storm ”, federal reserve bank of san francisco working paper, 2019 - 20 ; and kiley, m. t. ( 2019 ), op. cit. [ 25 ] for further discussion, as well as an explanation of the complementarities between these measures, see lane, p. r. ( 2019 ), “ reflections on monetary policy ”, keynote speech at bloomberg, 16 september, london ; coenen, g., montes - galdon, c. and smets, f. ( 2019 ), “ effects of state - dependent forward guidance, large - scale asset purchases and fiscal stimulus in a low - interest - rate environment ”, working paper series, ecb, forthcoming ; and hammermann, f., leonard, k., nardelli, s. and von landesberger, j. ( 2019 ), “ taking stock of the eurosystem ’ s asset purchase programme after the end of net asset purchases ”, economic bulletin, issue 2, ecb, pp. 29 - 46. [ 26 ] the importance of fiscal policy for the equilibrium real rate is discussed in summers, l. and l. rachel ( 2019 ), op. cit. [ 27 ] see esrb high - level task force on safe assets ( 2018 ), sovereign bond - backed securities : a feasibility study, vol. i and vol. ii, together with the underlying working papers. for an overview, see leandro, a. and zettelmeyer, j. ( 2019 ). “ the search for a euro area safe asset ”, working paper, no 18 - 3, peterson institute for international economics. european central bank directorate general communications sonnemannstrasse 20, 60314 frankfurt am main, germany tel. : + 49 69 1344 7455, e - mail : media @ ecb. europa. eu website : www. ecb. europa. eu reproduction is permitted provided that the source is acknowledged. media contacts copyright 2019, european central bank