Rising Costs Put US Economy Under Pressure Ahead of Midterm Elections

(MENAFN) The US is heading toward pivotal midterm elections with voters facing growing economic pressure from higher energy costs, expensive housing and elevated interest rates, factors that are increasingly affecting household finances and could influence the political balance in Congress.

The economic environment is emerging as a major issue ahead of the Nov. 3 elections, which will determine control of the House and Senate. Among the most noticeable pressures on consumers has been the sharp increase in fuel prices, with continued instability in the Middle East and fluctuations in global oil markets adding to concerns over energy costs.

The national average price of gasoline reached $4.32 per gallon on Sept. 14, representing a 35.9% increase from $3.18 recorded a year earlier. Diesel prices climbed even more sharply, reaching a record $6.23 per gallon, up 68.7% annually, while prices in California surpassed $8 per gallon. Diesel, which is heavily used across transportation, logistics and agriculture, had remained below $4 per gallon before the Russia-Ukraine war.

Inflationary pressures have also persisted across the wider economy. The consumer price index rose 0.4% in August and increased 3.4% from a year earlier, with higher fuel costs contributing to the rise. Core inflation, which excludes food and energy, advanced 0.3% on a monthly basis.

Wholesale prices showed similar pressure, with the producer price index increasing 0.4% in August and climbing 5.4% year over year, exceeding market expectations.

Financial markets are also anticipating a 25-basis-point increase in the Federal Reserve’s benchmark interest rate at its two-day meeting beginning Tuesday. Higher borrowing costs are already weighing heavily on the housing market, with the average 30-year fixed mortgage rate reaching 6.85% in early September, its highest level since June 2025.

The rise in mortgage rates has pushed refinancing applications to a 16-month low and made home purchases increasingly difficult for first-time buyers as borrowing costs approach 7%. At the same time, homeowners who secured lower mortgage rates have had greater incentives to remain in their current properties, contributing to limited housing supply and continued increases in rents across the country.

Government financing costs have also risen. The yield on the 10-year US Treasury note reached 5.03%, its highest level since July 2007. The increase came even as the Treasury Department expanded its bond buyback program, raising the previous $2 billion limit to at least $4 billion per operation in an effort to improve liquidity in the government debt market.

The country’s fiscal position has added another layer of concern. US public debt surpassed $40 trillion for the first time on Aug. 18, increasing by nearly $4 trillion since President Donald Trump began his second term in January 2025. During the first 11 months of the fiscal year, federal net interest payments on the national debt exceeded $1 trillion as elevated borrowing costs combined with persistent structural deficits.

With roughly 50 days remaining before the midterm vote, Trump also proposed a $5,000 payment to every American adult if Republicans win control of both chambers of Congress. The proposal drew support from conservative backers but faced strong criticism from liberal media outlets, while financial analysts warned that the estimated $1.2 trillion cost could increase the federal deficit and raise questions over the legality and implications of the plan.

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