OMM Newsroom
The Democratic Party’s sweeping victory in Tuesday’s US midterm elections secured majorities in both chambers of Congress, fuelling expectations that domestic inflationary pressures could ease and the Federal Reserve might scale back its expected hawkish moves, Anadolu Agency reported.
The new political balance is expected to curb large investments in artificial intelligence (AI) and create obstacles to the Trump administration’s expansionary fiscal policies.
The Democratic takeover has also contributed to optimism that US President Donald Trump may adopt a more moderate stance on tensions involving the United States, Israel and Iran.
De-escalation in the Middle East is expected to push energy prices lower, potentially removing a major source of global inflation and easing upward pressure on interest rates worldwide.
Geopolitical concerns over energy prompted the Federal Reserve to raise its policy rate by 25 basis points in September, to a range of 3.75%-4%. It was the bank’s first rate hike since 2023.
Tim Waterer, global chief market analyst at “KCM Trade”, said on Wednesday that a Democratic sweep “would probably be the least desirable outcome for tech stocks and risk assets more broadly.”
He said public opposition to the rapid expansion and construction of AI data centres had been a key issue in several previous congressional races.
“Opposition to the AI data-center buildout became a cornerstone issue in a number of congressional races,” Waterer told Anadolu. “If the party follows through on that campaign rhetoric, it could slow the pace of data-center construction — that in itself would carry a mildly deflationary impulse for the broader economy, which may in turn scale back expectations for just how aggressive the Federal Reserve needs to be with rate hikes from here.”
Kyle Rodda, senior financial markets analyst at “Capital.com”, said markets were interpreting the political developments as a sign that fiscal stimulus could weaken, amid expectations that Congress would block or disrupt Trump’s policies.
“At the margins, that reduces the upside risk to US inflation and interest rates,” he said.
