It is possible for a month’s activity data to show a steep drop that does not necessarily respond to economic factors and that are later offset in subsequent months, without either being construed as a change in the mediumterm trajectory of the economy. On the domestic expenditure side, a development of the third quarter most worth noting was the strengthening of investment which made up for a mild slowdown in consumption. By investment components, special mention deserves gross formation of fixed capital in machinery and equipment, as its rates of change in annual terms have remained high throughout the year (Figure 3). Our 2018-2020 growth forecast Turning to our projections, after growing 2.8% in the third quarter, we estimate growth for the full year at 4%. This projection—which considers October data up to the statistical closing of the Monteray Policy Report—is in the lower bound of the range estimated in September (4%-4.5%), mainly due to the deterioration of mining activity. However, compared with what we foresaw before September, the growth in 2018 is in the upper bound of the range (Figure 4). For the next two years, we still estimate that the economy will grow around potential, gradually approaching trend growth. 2  Thus, the projection ranges considered in September are maintained: 3.25% to 4.25% in 2019; 2.75% to 3.75% in 2020. For spending, we anticipate a change in composition, to higher growth in investment and some slowdown in consumption.
This will safeguard our independence and credibility as monetary policy maker and will ensure that monetary policy is not affected by considerations outside of the realm of monetary policy, for example the state of the banking sector. This is particularly important in the context of our emergency liquidity assistance (ELA), the provision of which is based on a sound and reliable solvency assessment. In the future, we will have these assessments at hand “in house”. Moreover, a strong resolution framework, with effective tools for orderly resolution, will in turn help to remove the pressure on the central bank to unduly prolong the life of banks through liquidity provision. Second, the banking union will help to unwind the reliance of the euro area banking sector on central bank intermediation. As mentioned, during this crisis we have activated a set of nonstandard monetary policy tools that – by nature – were intended to alleviate impaired monetary policy transmission and ultimately serve our primary objective to maintain price stability in the euro area. By alleviating funding pressures and undue risks in securities markets, our measures have provided temporary relief for the banking sector and complemented policy efforts on the financial stability front. However, our measures cannot and should not solve the underlying structural problems. This is a task for governments and the banking industry.