After years of ultra loose monetary policy, the European Central Bank announced on the 9th that it would stop net asset purchases from July 1 and planned to raise interest rates by 25 basis points in July, paving the way for the first interest rate increase in more than a decade. Experts believe that the European Central Bank has taken an important step in the right direction, but it must guard against the possible risk of debt crisis caused by interest rate hikes. The monetary policy decision of the European Central Bank is in line with the general expectations of economists. The German Chamber of Commerce and industry said that although the decision of the European Central Bank is not enough to eliminate imported inflation, if the interest rate is not increased, the exchange rate of the euro against the US dollar will be weaker, exacerbating the rise in energy prices. According to the prediction of the European Central Bank, the inflation rate in the euro area will reach 6.8% in 2022, and will drop to 3.5% and 2.1% in 2023 and 2024 respectively, both exceeding the expected target of 2%. Earlier this year, the Agency predicted that the inflation rate in 2023 and 2024 would be 2.1% and 1.9% respectively. Thomasaltman, an economist at QC partnership, a German investment company, said that the European Central Bank raised its inflation expectations, which greatly increased the possibility of a larger and longer cycle interest rate hike. European Central Bank President Christine Lagarde said at the news conference on the same day that the inflation rate in the euro zone reached 8.1% in May, mainly affected by the soaring energy and food prices. It is expected that inflation will remain high for some time. The European Central Bank is expected to raise interest rates again in September. If the medium-term inflation outlook continues or worsens, it will appropriately increase the rate increase. In order to combat the risk of deflation and stimulate the economic recovery of the euro zone, the European Central Bank has started the era of negative interest rates since june2014. At present, the main refinancing interest rate, marginal lending interest rate and deposit mechanism interest rate of the European Central Bank are maintained at 0.00%, 0.25% and negative 0.50% respectively. The European central bank implemented an asset purchase plan of about 2.6 trillion euros from March 2015 to December 2018; In november2019, a new round of asset purchase of 20billion euros per month will be restarted. In order to combat the COVID-19, the central bank also approved the emergency asset purchase plan, with a cumulative net debt purchase of nearly 1.72 trillion euros in the two years up to March this year. Some insiders warned that with the interest rate hike, some countries with high debt levels and slow economic growth may face debt risks. Therefore, European countries should be prepared. Some experts believe that rising bond yields are unlikely to cause a new debt crisis in the short term. Federico Santer, an expert of the Eurasian Group, a consulting firm, pointed out that European countries can intervene in the government bond market more specifically to prevent new crises. Lagarde also stressed that the European Central Bank would take action once the bond yield spread among euro zone countries widened sharply, which hindered the transmission of monetary policy to economic sectors. She also said that if necessary, new tools would be developed to deal with it. (Xinhua News Agency)