The days are counting down as the November 8th midterm elections approach. Polls over the last few weeks seem to indicate a shift of momentum to the Republicans.
In the House, with 435 races, it is hard to forecast as polling is scarce and local issues that don’t register on the national scene can play a role. However, House midterms are usually a referendum on the party in power and with Biden’s approval rating south of 50% this can’t be good news for Speaker Pelosi and House Democrats. The Democrats go into Election Day with a majority of only five votes.
In the 50/50 Senate a handful of races remain within the margin of error in polling data.
Debates have now been held in most of the key Senate races, but one critical one between Pennsylvania Senate candidates Oz and Fetterman occurs next week. From my experience in campaigns, debates often have little impact but can help a candidate who needs to demonstrate their credibility to serve in the office, or most dangerously can hurt a candidate with a major gaffe that then becomes the issue. To date no candidate has made a major misstep in a debate and they again don’t seem to have had a big impact on any campaign.
With the economy front and center as a key issue in nearly all the races, the Fed could become a factor by creating a last-minute surprise at the meeting of the Federal Open Markets Committee (FOMC) just a week before the midterms. There is growing speculation that while a 75-bps rate increase seems a foregone conclusion, how the Committee describes future action could send a critical message on the economy.
The Fed has raised its benchmark federal funds rate by 0.75 points at each of its past three meetings, most recently in September, bringing the rate to a range between 3% and 3.25%. Officials are raising rates at the most aggressive pace since the early 1980s. Until June, they hadn’t raised rates by 0.75 points since 1994.