How does the Catholic Church explain their interpretation of Matthew 16:19 (Simon Peter as the first Pope) in light of Matthew 18:18?
First of all, the classical Scriptural references that the Church uses to make it’s point about the primacy of St. Peter as head of the Church is Matthew 16:17-19, and John 21:15-17. Matthew 18:18 is not included. The Scriptural reference of Matthew 18:18 clearly addresses that apostolic body of Apostles as a
group.
What is important hear to notice is the fact that Christ was directly talking to Peter in Matthew 16:17-19. The Church has always maintained the the phrasing of binding and loosening is directed to his Apostolic Primacy of authority over the Church.
The Prince of the Apostles had been given his power or authority (over the Church) first and prior to the other Apostles; the other Apostles together are a share of Apostolic powers (forgiving sins) to a lesser degree a little later on.
Many will disagree with this, but Peter is the Rock, instituted by Jesus for His Church!
He follows the the Scriptural references of Matthew 16:17-19 in question in English, Latin and Greek:
17 And Jesus answered him, Blessed art thou, Simon son of Jona; it is not flesh and blood, it is my Father in heaven that has revealed this to thee. 18 And I tell thee this in my turn, that thou art Peter, and it is upon this rock that I will build my church; and the gates of hell shall not prevail against it; 19 and I will give to thee the keys of the kingdom of heaven; and whatever thou shalt bind on earth shall be bound in heaven; and whatever thou shalt loose on earth shall be loosed in heaven.
17 Respondens autem Jesus, dixit ei: Beatus es Simon Bar Jona: quia caro et sanguis non revelavit tibi, sed Pater meus, qui in cælis est. 18 Et ego dico tibi, quia tu es Petrus, et super hanc petram ædificabo Ecclesiam meam, et portæ inferi non prævalebunt adversus eam. 19 Et tibi dabo claves regni cælorum. Et quodcumque ligaveris super terram, erit ligatum et in cælis: et quodcumque solveris super terram, erit solutum et in cælis.
17 ἀποκριθεὶς δὲ ὁ Ἰησοῦς εἶπεν αὐτῷ: μακάριος εἶ, Σίμων Βαριωνᾶ, ὅτι σὰρξ καὶ αἷμα οὐκ ἀπεκάλυψέν σοι ἀλλ' ὁ πατήρ μου ὁ ἐν τοῖς οὐρανοῖς. 18 κἀγὼ δέ σοι λέγω ὅτι σὺ εἶ Πέτρος, καὶ ἐπὶ ταύτῃ τῇ πέτρᾳ οἰκοδομήσω μου τὴν ἐκκλησίαν, καὶ πύλαι ᾅδου οὐ κατισχύσουσιν αὐτῆς. 19 δώσω σοι τὰς κλεῖδας τῆς βασιλείας τῶν οὐρανῶν, καὶ ὃ ἐὰν δήσῃς ἐπὶ τῆς γῆς ἔσται δεδεμένον ἐν τοῖς οὐρανοῖς, καὶ ὃ ἐὰν λύσῃς ἐπὶ τῆς γῆς ἔσται λελυμένον ἐν τοῖς οὐρανοῖς.
As for it’s interpretation by the Church, here is how the Catholic Encyclopedia explains it:
Institution of a supreme head by Christ
The proof that Christ constituted St. Peter head of His Church is found in the two famous Petrine texts, Matthew 16:17-19, and John 21:15-17.
Matthew 16:17-19
In Matthew 16:17-19, the office is solemnly promised to the Apostle. In response to his profession of faith in the Divine Nature of his Master, Christ thus addresses him:
Blessed art thou, Simon Bar-Jona: because flesh and blood hath not revealed it to thee, but my Father who is in heaven. And I say to thee: That thou art Peter; and upon this rock I will build my Church, and the gates of hell shall not prevail against it. And I will give to thee the keys of the kingdom of heaven. And whatsoever thou shalt bind on earth it shall be bound also in heaven: and whatsoever thou shalt loose on earth, it shall be loosed also in heaven.
“Blessed art thou, Simon Bar-Jona: because flesh and blood hath not revealed it to thee, but my Father who is in heaven." The prerogatives here promised are manifestly personal to Peter. His profession of faith was not made as has been sometimes asserted, in the name of the other Apostles. This is evident from the words of Christ. He pronounces on the Apostle, distinguishing him by his name Simon son of John, a peculiar and personal blessing, declaring that his knowledge regarding the Divine Sonship sprang from a special revelation granted to him by the Father (cf. Matthew 11:27).
"And I say to thee: That thou art Peter. . ." He further proceeds to recompense this confession of His Divinity by bestowing upon him a reward proper to himself:
Thou art Peter [Cepha, transliterated also Kipha] and upon this rock [Cepha] I will build my Church.
The word for Peter and for rock in the original Aramaic is one and the same; this renders it evident that the various attempts to explain the term "rock" as having reference not to Peter himself but to something else are misinterpretations. It is Peter who is the rock of the Church. The term ecclesia (ekklesia) here employed is the Greek rendering of the Hebrew qahal, the name which denoted the Hebrew nation viewed as God's Church.
"And upon this rock I will build my Church. . ." Here then Christ teaches plainly that in the future the Church will be the society of those who acknowledge Him, and that this Church will be built on Peter.
The expression presents no difficulty. In both the Old and New Testaments the Church is often spoken of under the metaphor of God's house (Numbers 12:7; Jeremiah 12:7; Hosea 8:1; 9:15; 1 Corinthians 3:9-17, Ephesians 2:20-2; 1 Timothy 3:5; Hebrews 3:5; 1 Peter 2:5). Peter is to be to the Church what the foundation is in regard to a house.
He is to be the principle of unity, of stability, and of increase. He is the principle of unity, since what is not joined to that foundation is no part of the Church; of stability, since it is the firmness of this foundation in virtue of which the Church remains unshaken by the storms which buffet her; of increase, since, if she grows, it is because new stones are laid on this foundation.
"And the gates of hell shall not prevail against it." It is through her union with Peter, Christ continues, that the Church will prove the victor in her long contest with the Evil One:
The gates of hell shall not prevail against it.
There can be but one explanation of this striking metaphor. The only manner in which a man can stand in such a relation to any corporate body is by possessing authority over it. The supreme head of a body, in dependence on whom all subordinate authorities hold their power, and he alone, can be said to be the principle of stability, unity, and increase. The promise acquires additional solemnity when we remember that both Old Testament prophecy (Isaiah 28:16) and Christ's own words (Matthew 7:24) had attributed this office of foundation of the Church to Himself. He is therefore assigning to Peter, of course in a secondary degree, a prerogative which is His own, and thereby associating the Apostle with Himself in an altogether singular manner.
"And whatsoever thou shalt bind on earth it shall be bound also in heaven: and whatsoever thou shalt loose on earth, it shall be loosed also in heaven." Further the character and extent of the power thus bestowed are indicated. It is a power to "bind" and to "loose" — words which, as is shown below, denote the grant of legislative and judicial authority. And this power is granted in its fullest measure. Whatever Peter binds or looses on earth, his act will receive the Divine ratification.
Objections
The meaning of this passage does not seem to have been challenged by any writer until the rise of the sixteenth-century heresies. Since then a great variety of interpretations have been put forward by Protestant controversialists. These agree in little save in the rejection of the plain sense of Christ's words. Some Anglican controversy tends to the view that the reward promised to St. Peter consisted in the prominent part taken by him in the initial activities of the Church, but that he was never more than primus inter pares among the Apostles. It is manifest that this is quite insufficient as an explanation of the terms of Christ's promise.
As for Matthew 18:18 goes it is clear that Our Lord is talking to all the apostles and the power of forgiving sins. This is evidence by the verses just preceding this passage.
18 I promise you, all that you bind on earth shall be bound in heaven, and all that you loose on earth shall be loosed in heaven.
18 Amen dico vobis, quæcumque alligaveritis super terram, erunt ligata et in cælo: et quæcumque solveritis super terram, erunt soluta et in cælo.
18 Ἀμὴν λέγω ὑμῖν, ὅσα ἐὰν δήσητε ἐπὶ τῆς γῆς ἔσται δεδεμένα ἐν οὐρανῷ καὶ ὅσα ἐὰν λύσητε ἐπὶ τῆς γῆς ἔσται λελυμένα ἐν οὐρανῷ.