Economic sanctions push Russia out of SWIFT? Academics point to key reasons

After Russia’s full-scale attack on Ukraine, Western countries have successively imposed economic sanctions, but they are relatively conservative about whether to expel Russia from SWIFT. Scholars from the Taiwan Academy of Economics pointed out the key reasons, pointing out that in order to avoid chaos in the political and economic order, the possibility of expelling Russia from SWIFT is extremely low.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system was originally intended to replace telex, and today more than 11,000 financial institutions use SWIFT to send secure messages and payment instructions. With no other world-recognized alternative, SWIFT remains the most important conduit for global financial transactions.

Russia’s expulsion from SWIFT would mean that it would be almost impossible for financial institutions to send money in or out of the country, which would be a sudden blow for Russian companies and their foreign customers, especially those who buy oil and gas from Russia and sell them in U.S. dollars. priced buyers.

The Taiwan Academy of Economics held a press conference today, during which they also expressed their views on this issue. Wu Mengdao, director of the Taiwan Academy of Economics, pointed out that US President Joe Biden announced new sanctions against Russia today, but mentioned that the current series of sanctions against Russia did not include a ban on Russia’s use of SWIFT.

“If Russia is really eliminated, the financial market will be in chaos.” Wu Mengdao said that when it is impossible to operate under SWIFT, even if an order can be placed, there is no way to actually execute the transaction; although Russia is trying to de-dollarize, 80% of the main external commodity transactions are Still US dollar transactions.

Wu Mengdao explained that the expulsion of Russia from SWIFT will have a considerable impact on the Russian economy, but this is also the reason why Germany does not want to do this, because Germany and Russia have relatively large trade exchanges in energy, considering the international economic and trade order, wars Shouldn’t escalate to this level.

“U.S. inflation figures are usually inverse to the support of the U.S. president.” Sun Mingde, director of the Economic Prediction Center of the Taiwan Academy of Economic Sciences, pointed out another reason. U.S. oil prices account for a very high proportion of consumer price inflation (CPI). That is to say, oil prices soared. A rise would be detrimental to the US President’s approval ratings.

Based on the above factors, Sun Mingde believes that electricity prices and natural gas have risen sharply in Europe last year. If the economic order is in chaos due to sanctions and energy prices soar, European economic growth will be hit, and the United States is not happy with such a situation. Therefore, most of the international consensus is It is to use “precision strikes” and try not to hurt yourself.

U.S. CPI surged by 7% | Expert: The decline of the U.S. exchange is due to the fact that the dragon has been fried earlier! U.S. stocks rally is unfinished

The U.S. inflation rate in December last year hit the highest level since 1982, but the market did not fluctuate much, but the U.S. dollar index fell below the 95 mark.

Expert analysis pointed out that the market had high expectations for inflation earlier, and the current drop in the US dollar is a short-term adjustment. They believe that there is still a great opportunity for US stocks to rise, and it is recommended to buy stocks that resist inflation and grow rapidly.

The US consumer price index (CPI) rose 7% year-on-year in December last year, hitting a new high in nearly 40 years, in line with market expectations, and rose 0.5% month-on-month, slightly higher than expected; excluding food and energy prices, the core CPI rose year-on-year 5.5%, up 0.6% month-on-month, both higher than market expectations.

The reason for high inflation comes from the blockage of the supply chain. Fed Chairman Powell said at the hearing of the Senate Banking Group on Tuesday (11th) that the supply and demand imbalance and supply chain bottlenecks in the reopening of the economy after the epidemic are important reasons for raising inflation. It is hoped that this year will be able to “Return to normal supply conditions” but supply constraints are very persistent and not much progress has been made so far. And the Fed has pledged to act to avoid “entrenching” high inflation, which it will do if it has to raise interest rates more times over a longer period.

At the same time, the Fed is confident of maintaining price stability, normalizing policy in 2022, ending its asset purchase program at the end of March, and potentially allowing for a reduction in its balance sheet later this year. At the same time, U.S. President Biden said that the latest inflation data reflects a slowdown in price increases, but there is still a long way to go before returning to normal levels, while Deese, Biden’s economic adviser, also believes that price pressures are expected to ease in 2022.

Lin Qiaoji: The decline of the US exchange is only short-term, and the opportunity for US stocks to rise is still great
In an environment of high inflation, the Fed has accelerated water collection to control inflation. The interest rate dot plot from December last year shows that the United States will raise interest rates three times this year, while the market maintains the forecast that the Federal Reserve will raise interest rates in March. According to Bloomberg interest rate futures, the market believes more than 80% chance that the United States will raise interest rates in March. In fact, many Fed committees have said that the bureau needs to speed up the tightening of monetary policy. Even Brainard, a dovish representative, said that controlling inflation is the most important task, and he wants to bring inflation back to 2%.

However, U.S. inflation has been at 5% or more for eight consecutive months, and tightening monetary policy has traditionally brought money back, but now the market is doing the opposite. The U.S. 10-year bond yield fell to 1.75% at the end of the session, and the U.S. exchange index fell sharply and fell below the 95 mark.

Lin Qiaoji, managing director and head of research at CEB International, believed in an interview that the correction in the US dollar index is only a short-term adjustment, “Earlier, the market had higher expectations for inflation, so the US dollar exchange rate and bond interest rates rose more rapidly. In line with expectations, we will make short-term adjustments.” He expects that U.S. inflation will remain at a high level of 5 to 6 percent this year, and that the U.S. is currently in a state of “work and no return.” He believes that Powell’s remarks are mainly used to lower the market’s inflation expectations, thereby slowing down the pace of wage growth.

Xu Huifang: Seeing support at the 94.6 level of Meihui
In addition, Lin Qiaoji believes that the chances of U.S. stocks rising repeatedly are still high for the time being. Compared with the epidemic, the market is more concerned about inflation. Therefore, it is recommended to buy stocks that resist inflation and grow rapidly, while U.S. stocks are still higher than other markets.

Xu Huifang, an investment advisor of Guotai Junan Wealth Management, said in an interview that the market has now expected to raise interest rates from 3 times to 4 times, so I believe that the US exchange will not weaken. It regained its upward trend, and other currencies took the opportunity to adjust, and were optimistic about commodity currencies such as New Zealand paper and Australian paper. At the same time, she is also optimistic about US stocks, and emerging markets also rebounded while the US dollar fell.