NEW YORK — With voters' day-to-day sense of the economy emerging as the biggest variable in the U.S. midterm elections on Nov. 3, gasoline prices and mortgage rates are driving up the cost of living. Oil prices are likely to stay elevated at least through the end of the year, given that the war with Iran has almost no chance of ending before the vote. Interest rates face further upward pressure as the Federal Reserve has begun tightening in earnest. Inflationary pressure has intensified while wage growth lags far behind. Against that backdrop, forecasts increasingly point to a split outcome, with Republicans holding a majority in the Senate and Democrats winning the House. The reason is that only a portion of Senate seats are contested, unlike the House, where every seat is up. That would be somewhat less favorable for President Donald Trump than the current arrangement, in which Republicans control both chambers, but the party would still preserve the minimum balance needed to govern. As the midterms approach, what kind of giveaway pledges Trump offers is also expected to matter considerably for global financial markets. There is also concern that losing the House to the Democrats could lead to more unilateral policymaking that bypasses Congress.
U.S. Mortgage Rates Near 7%, Adding Tens of Thousands of Dollars Over 30 Years Since the War
The Wall Street Journal reported on the 18th that ahead of the midterms, nearly everything from buying a home to filling a car's gas tank costs more than it did a week earlier. The consumer price index rose 3.4% last month from August a year earlier, far above the Fed's 2.0% target. Average hourly wages rose 3.1% over the same period, trailing inflation for a fifth straight month.
The average rate on a 30-year fixed mortgage was 6.95% this week, up 0.19 percentage points from the prior week, according to Freddie Mac, the government-sponsored mortgage company, on the 17th. It was the fourth consecutive weekly increase and the largest weekly gain in 16 months. It was also the highest level since January last year, when Trump returned to office.
U.S. mortgage rates stood at just 5.98% on Feb. 27, the day before the United States and Israel struck Iran. They have climbed steeply since then on rising global oil prices, quickening inflation and concern over growing U.S. federal debt. That means Americans buying the same house now pay tens of thousands of dollars more in principal and interest over a 30-year mortgage than they would have seven months ago.
The rate outlook is not encouraging either. The Fed abruptly raised its benchmark rate at the Federal Open Market Committee meeting on the 15th and 16th of this month, its first increase in three years and two months. In the dot plot within its Summary of Economic Projections — a quarterly chart showing individual policymakers' rate forecasts as dots — the 18 Fed officials excluding Chair Kevin Warsh put the median year-end rate at 4.125%, signaling the possibility of one more increase this year. Federal funds futures on the 18th priced in a 46.0% probability of a 0.25 percentage point increase by year-end and a 44.1% probability of a 0.50 percentage point increase, according to CME FedWatch, putting the overall odds of a further increase this year at 90.1%.
The Fed's tightening stance could, of course, be read as a signal of long-term inflation control and help stabilize market rates that have already surged. Investors remain unconvinced so far. The yield on the benchmark 10-year Treasury note, which fell on the 17th immediately after the FOMC meeting, rebounded on the 18th to move back above 5%. The two-year yield, which is sensitive to monetary policy, and the 30-year yield, which serves as a reference for U.S. mortgages, rose 0.0662 percentage points and 0.0346 percentage points to 4.7560% and 5.3310%, respectively. At least through the midterms, ordinary borrowers are likely to feel the high-rate environment directly.
Diesel at a Record $6.40 a Gallon Feeds Into All Prices, but Household Pain Is Invisible in Macro Data
Fuel prices, which have surged since the Middle East war began, are also moving voters. The national average price of diesel hit a record $6.40 a gallon on the 17th, heightening a sense of crisis within the Trump administration. That is more than 70% above the $3.71 level of a year earlier. The average retail price of diesel reached $6.06 a gallon on the 11th, crossing $6 for the first time, according to AAA. It has risen more than 30 cents in less than a week since.
Because diesel fuels the trucks that form the backbone of the U.S. logistics system, it can affect the price of everything. The National Grocers Association, which represents 7,500 supermarkets worldwide, estimates that fuel accounts for 15% to 30% of grocery prices, according to The Associated Press. Amazon, the largest U.S. e-commerce company, has begun charging some sellers a 3.5% fuel surcharge since the war began. FedEx, UPS and the U.S. Postal Service are also adding fees on some parcels. Diesel is also the main energy source for farm machinery used to grow and harvest crops, fishing vessels, heating, power generation and heavy construction equipment.
Bloomberg forecast that "this issue could become important in Maine, which has the highest share of households using home heating oil, and in farm states such as Ohio, Kansas and Iowa that are approaching harvest season." Maine, Ohio and Iowa are among the states classified as battlegrounds in Senate races. The Journal also said diesel prices could rise further as fuel demand from U.S. farms increases during the fall harvest and heating-oil boilers fire up in the Northeast, where winter arrives early.
Representative Tim Burchett, a Republican from Tennessee, introduced a bill on the 16th that would temporarily ban diesel exports through January, the Journal reported on the 17th. Senate Majority Leader John Thune, a Republican from South Dakota, also signaled he was open to considering a diesel export ban, the Journal said. Interior Secretary Doug Burgum, who also chairs the White House National Energy Dominance Council, said at a Group of 20 ministerial event in Houston on the 14th that a diesel export ban was "not under consideration at this time," but added that he would "look at it if we conclude it can bring prices down."
Global oil prices have stayed above $100 a barrel amid a succession of events including Ukrainian attacks on Russian refineries, the seizure of waters near the Red Sea by Yemen's pro-Iran Houthi rebels and a strike on Saudi Arabian crude shipping facilities. Prices did fall for three straight sessions from the 16th to the 18th on expectations that Saudi Arabia's East-West pipeline, an alternative crude export route, could be repaired relatively soon. Still, as of the 18th, November Brent futures on the ICE Futures exchange in London and October West Texas Intermediate futures on the New York Mercantile Exchange remained at $103.87 and $100.30 a barrel, respectively. Shipping data showed only four commodity carriers passed through the Strait of Hormuz on the 17th, far below the 16-vessel average of the past 10 days.
This deterioration in households' lived experience is a dimension that does not show up in the macroeconomic data released by the Trump administration and the Fed. Immediately after the FOMC meeting on the 16th, the Fed raised its forecasts for real U.S. gross domestic product growth this year and next by 0.1 percentage point each from June, to 2.3% and 2.4%. It put this year's unemployment rate forecast at 4.1%, 0.2 percentage points lower than in June. U.S. household net worth reached $186 trillion in the second quarter, up $26 trillion from the end of 2024, according to the Fed. Retail sales in August rose 1.2% from July, the Commerce Department said on the 16th, beating the 0.8% consensus estimate compiled by Dow Jones. Warsh said at the FOMC news conference that the decision to raise rates came "at a time when the U.S. economy appears to be strengthening," adding that indicators including new hiring, private income and corporate capital investment had improved in recent months.
Republicans Favored in Senate, Democrats in House; AI and Data Center Backlash Also a Factor
Jang Seong-kwan, head of the U.S. strategy office at D&A Advisory, a U.S. political consulting firm, said at a briefing for Korean correspondents hosted by the Korean Consulate General in New York on the 14th that voters' lived sense of the economy, rather than economic indicators expressed in numbers, will decide the election. "The conventional wisdom in the United States is that voters' choices are already set six months before an election," Jang said. "The No. 1 factor (affecting the election) is, without question, the day-to-day economy." Jang predicted Americans would respond more sensitively to prices and credit card delinquency rates they feel directly than to economic indicators presented as figures. "In the United States, there has traditionally been a strong perception that the conservative Republican Party is the more trustworthy one on the economy and security, but a recent Fox News poll showed more trust in the Democratic Party on the economy and taxes," Jang said. "Trump's pledge to give $5,000 in dividends to every American adult appears to have been made with that poll result in mind."
In a speech at the Republican convention in Dallas, Texas, on the 9th, Trump pledged that "if Republicans win both the House and the Senate, we will pay a $5,000 dividend to every American adult." Paying $5,000 to roughly 240 million American adults would total $1.2 trillion (about 1,600 trillion won), according to CNBC. That is comparable to the $1.27 trillion in interest on the national debt and the $1.36 trillion in defense spending the U.S. government has paid so far in fiscal 2026, which runs from Oct. 1 last year through Sept. 30 this year.
Jang said the structure of U.S. federal elections makes it likely that Republicans will hold the Senate majority while Democrats take the House. Only three times in U.S. history has the party in power swept both chambers: in 1934, under President Franklin D. Roosevelt in his first term during the Great Depression; in 1998, under President Bill Clinton, who drew sympathy while facing impeachment over a sex scandal; and in 2002, under President George W. Bush, buoyed by the national unity that peaked after the Sept. 11 attacks.
The 100-seat Senate is currently divided among 53 Republicans, 45 Democrats and two independents who lean Democratic. Of those, 35 seats are contested in the midterms — 22 currently held by Republicans and 13 by Democrats — and Jang's analysis was that 16 Republican seats and 10 Democratic seats are party strongholds where the outcome is effectively settled. In that case, Republicans would reach 50 seats by winning just three of the remaining nine competitive seats. At a 50-50 split, Vice President JD Vance, as president of the Senate, would cast the tie-breaking vote, allowing Republicans to function as the majority. "Even on the most optimistic projection, it looks difficult for the Democrats to win a majority," Jang said. "Thanks to Trump's personal fundraising efforts, Republicans also have overwhelmingly more campaign money."
Jang said that in the House, where all 435 seats are up, most analysts expect a narrow Democratic win. The chamber now consists of 218 Republicans, 214 Democrats, one independent and two vacancies. According to Jang, prominent U.S. political analysts generally expect Democrats to win 223 to 229 seats and Republicans 206 to 212. "The party in power has lost an average of 18 House seats in midterms, and the dominant expectation is that this time will produce a similar result," Jang said. "The biggest question will be what results pro-Trump candidates get in Republican-leaning areas such as Texas."
Democrats Vow Probe of Trump Family Corruption and Impeachment Push if They Win; White House Campaign Response Also a Market Factor
Jang said that even in an election whose broad shape is largely set, late-stage variables could emerge, including prices, defections among Trump supporters, positions on artificial intelligence and data centers, public opinion on Israel, and party members' distrust of the Democratic leadership. He also pointed to how anti-establishment sentiment running through supporters of both parties plays out on each side as a factor to watch.
"Canada is the main export destination for most of the nine competitive Senate states, so they are affected by Trump's retaliatory tariffs and rising diesel prices," Jang said. "Because of the Iran war, prices and reduced health insurance benefits, 20% of Trump's support base — men in their 20s and 30s, Hispanic men and Midwestern farmers — is drifting away." He added: "On AI data centers, ordinary Americans didn't even know what they were until last year, so there was no positive or negative opinion at all, but since May this year even centrist governors from both parties have been pushing policies to block construction. Ordinary citizens lump AI together with issues such as unmanned surveillance cameras, and because Trump keeps making remarks defending data centers, Republican candidates in swing states are in an awkward position." Jang also said: "Most Democrats didn't like former President Joe Biden to begin with, but the party blocked other candidates from running. When they swapped in Vice President Kamala Harris as the nominee, the leadership didn't gather members' views at all, so this election is the first chance since the presidential race for Democrats to voice their discontent with the party leadership."
Both parties are campaigning on claims that they hold the advantage. House Majority Leader Steve Scalise, a Republican from Louisiana, said in an interview with Axios on the 17th that "if we make this an election that highlights the differences, we'll win up to 225 seats," adding that "a six-seat majority is possible." Scalise put the number of genuinely competitive races at 35 and said Republicans could realistically flip about 15 of them.
Democrats, by contrast, expressed confidence that rising cost-of-living pressures were working strongly in their favor. Senate Minority Leader Chuck Schumer, a Democrat from New York, said in an interview with The Washington Post on the 18th that "if the election were held today, we would be the majority," assessing that the current environment is strikingly similar to the 2006 midterms, when Democrats swept both chambers.
Representative Robert Garcia, a Democrat from California and the ranking member of the House Oversight Committee, went further, saying in an interview with the Financial Times on the 17th that corruption allegations involving Trump's family would be the first target of investigation if Democrats win the majority. Those targets are expected to include Donald Trump Jr., the president's eldest son and vice chairman of the Trump Organization, whose investment firm signed contracts worth millions of dollars with the U.S. Defense Department; eldest son-in-law Jared Kushner, suspected of profiting while handling Middle East diplomacy; and Tesla Chief Executive Elon Musk, who led the Department of Government Efficiency in the first half of last year. The Trump family has earned at least $1 billion (about 1.4 trillion won) through various cryptocurrency ventures, according to the FT.
The House Oversight Committee is a standing committee with broad authority to monitor and investigate the federal government. Garcia is expected to chair the panel if Democrats win the House. He also cited gathering evidence that could support Trump's impeachment as one goal of the investigations.
With voters' financial strain deepening around the midterms, the campaign strategies Trump reaches for are also likely to remain a market variable for some time. Because the Middle East war is unlikely to be fundamentally resolved, rising fuel prices and high interest rates could carry considerable force until the vote. Speaking to reporters at the White House in Washington on the 18th, Trump repeated his standing claim that the Iran war would end soon and oil prices would plunge, without specifying when.
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