Bitunix Analyst: Democrats Regain Congress to Check Fed's Personnel Authority, Employment Resilience Still Limits Room for Rate Cuts

November 5 — The U.S. midterm election results have reshaped Washington's power structure, with Democrats regaining control of both chambers of Congress and Republicans losing their full grip on the White House and Congress. Markets responded on Wednesday with a rebound in risk appetite, as the S&P 500 rose 1.6%, the Dow Jones Industrial Average gained 3%, and Trump also expressed willingness to accept the election results and cooperate with Democrats, temporarily easing concerns about political conflict. However, the more far-reaching impact of the election lies in the checks on the Fed's personnel appointment power: confirmation authority in the Senate has shifted to Democratic control, which will limit the White House's ability to change the Board's structure through new appointments. The Senate Banking Committee, expected to be led by Elizabeth Warren, may also strengthen oversight of Chair Warsh and the transparency of monetary policy.

However, stronger institutional checks do not mean interest rate policy will necessarily shift toward easing. ADP data showed that the private sector added 86,000 jobs in October, above the market expectation of 69,000, while basic wage growth held at 3.2% and pay for job-changers rose 4.8% year over year, reflecting that corporate hiring and labor mobility remain resilient. JOLTS job openings simultaneously increased by 333,000 to 7.523 million, while layoffs fell to 1.641 million, indicating that the labor market has not yet deteriorated across the board, but continued job losses in professional and business services also show that the industrial recovery is uneven.

The market's next key event is the nonfarm payrolls report to be released on November 6, with expectations of 65,000 new jobs and the unemployment rate holding at 4.2%. If employment remains stable, the Fed will have more room to observe inflation; only if the data clearly weaken may the market raise expectations for dovish policy again. The Reserve Bank of Australia's rate hike to 4.85% this week also reflects that global inflationary pressure has not yet subsided. Overall, the election has reduced some political uncertainty, but has not eliminated the contradiction between monetary policy and economic fundamentals.