The Cost of Living Crisis Isn’t Going Away

The Democratic-controlled Senate is set to feature a number of new faces, but likely not going anywhere, leader Chuck Schumer. Plus, we'll look at whether the chamber will be able to rein in the president's foreign policy and why voters motivated by inflation aren't set for any immediate relief. This crisis of affordability and inflation, these things are not over yet. We likely still have many more months to come until we start seeing inflation going back down and until we start seeing interest rates falling again. It's Thursday, November 5th. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. After retaking the Senate with the help of a number of history-making candidates, including several who pitched themselves as political outsiders in Kansas, Michigan, and South Carolina, one thing that's not poised to change is who leads the party in the chamber. Our Lindsay Wise reports that although a number of newly elected Dems say they won't vote for him, New York's Chuck Schumer is on course to resume his post as majority leader, a major reversal of fortunes after progressives and advocates were calling for his resignation last spring. Schumer himself said on Wednesday that he expects to win re-election as Democrat Senate leader, this time in the majority. No one has emerged to challenge him, and even though some newly elected Democrats have pledged not to vote for Schumer, and other Senators say the conference needs to have a robust discussion about their goals going forward, Schumer still will have broad support in the Democratic conference when Senators meet to vote for their leader in the coming days. As one Democratic Senator put it, no one should doubt Schumer's job security, given that many of his colleagues see him as the architect of Democrats' huge Senate victory this week. Speaking of which, when all is said and done, how big will that Democratic Senate majority really be? 54 seats? 55? 56? Any one of those outcomes remains possible as vote counting continues in Alaska and Mississippi. In Alaska, less than 1,000 votes separate Democratic challenger Mary Peltola and Republican incumbent Dan S. Sullivan. About three-quarters of votes have been counted, but since no candidate topped 50 percent, the state's ranked-choice voting system will need to kick in, triggering a process that'll see the weakest candidate eliminated one by one, and their votes redistributed. Voters will have to vote for their second choice, and on and on until someone has a majority. But don't hold your breath for a result. Ranked-choice tallying won't even begin before November 18th's deadline for absentee ballots, meaning that a winner may not be known for weeks. Meanwhile, things are slightly less complicated, but no less of a nail-biter in Mississippi. With an estimated 96 percent of votes counted, Democratic Senate challenger Scott Colombe is leading Republican incumbent Cindy Hyde-Smith by just over 1,100 votes. Absentee-by-mail and affidavit ballots are still to come in or be processed, but don't expect as long a wait as in Alaska. Counties must certify their results by November 13th, and while a recount could be ordered by the courts, Colombe said he's ready for whatever comes next. We're going in a new direction, and so we're prepared to litigate, though. We were prepared for this for months. We have an army of lawyers. We have local lawyers. We have everybody involved to make sure the process is followed according to the law. A win for Colombe would mark a major upset for Democrats, given that President Trump carried Mississippi by more than 20 points just two years ago. And ahead of the midterms, tech companies were already struggling to secure enough computing power to meet growing demand for their products. And with Americans across the country voting for candidates and ballot measures to ban or slow data center development, those companies are now wondering if AI's rapid growth is about to be curbed. Speaking at WSJ Tech California yesterday, Meta President Dina Powell-McCormick admitted she spends about 80% of her time trying to secure compute power and that building data centers is only going to get harder. I can't name the person, but we did have a governor that won last night who did make data centers a big part of the platform, say as soon as we get past the inauguration, let's meet because we don't want to lose this investment in our town. We don't want these jobs to go elsewhere. So I think it's going to be harder. I think it has been hard, I should say. But I also think that it's it's becoming clear what models work and the states want those models that work because they want they want the ability to say we've invested, we have these jobs, but there has to be local support. The governor's elect of Ohio and Texas have both called for conditional freezes on new data center construction. Meta is in the process of building massive data centers in both states, along with another in Louisiana. How much control will President Trump have over his signature foreign policies come January? While a remade Congress should be able to hold up his nominees, bat down a range of domestic policies and direct spending, our Bertrand Benoit reports that Democrats will struggle to steer his foreign agenda. And Bertrand joins us now with more. Bertrand, the going thinking is that lame duck presidents, which Trump will become next year, are often quite active in foreign policy. Big picture, it sounds like you're seeing signs of the same. Yes. And I have to say before we talk about anything else that there's a lot of speculation here. This president has been very unpredictable. At the height of his power, it was very unclear what he was going to do next. And it's been his way of operating. But it's fair to say that objectively, foreign policy and trade, the way he has structured his trade policy with tariffs is one of the areas where he has the most margin of maneuver while facing a hostile Congress. And so people outside the U.S. expect him to be more active in this field than he will be domestically, where he's going to be facing more constraints. The obvious foreign policy choice in front of President Trump, as we've talked about a lot in recent weeks, is what to do with Iran. Pursue negotiations and or dial up the fighting. And I guess one consideration here is that the potential electoral damage stemming from an intensifying war is at least for now behind him. What does that lead the president to do? Yeah, there is some political pressure to find a way out of this. From another angle, as you say, the political damage is done. Trump is not going to run again. There's very little politically for him to lose now. And at the same time, extricating yourself from a situation like this is by nature difficult, complicated. It's not all of the U.S. choosing. There are many other variables there and many other actors that have agency. And so it really could go either way. From stepping up the attacks down to trying to find a face-saving way out of this entanglement. And is a Democratic Congress at all a part of that calculus? Obviously, a unified Congress against the president can do a lot of things, including restrict funding, demanding an end to war powers. And that could play a role here. But I think the White House, you know, it can't be relied systematically to work with Congress or to do what Congress says, even when the law is quite clear. Conflict to a potential one. You looked into whether the president may try to pursue regime change in Cuba. What is the thinking there? Not least, if there are questions around whether Secretary of State Marco Rubio, who has been a big leader of sort of redirecting U.S. foreign policy to the Western Hemisphere, sticks around for the second term, right? A lot of that portfolio has been led by him. The common sense answer to this is that you may not want to start another war when you're having difficulty extracting yourself from the previous one. And so. So that would suggest you'd want to solve the situation in Iran before you turn to this. On the other hand, you have the Venezuela playbook, which was over very quickly, minimal cost and achieve the objectives. You could look at Cuba and think this is more likely to be something like this than an Iran situation. And that would maybe speak in favor of trying to get a quick win, especially if you think it can be done with relatively little personnel and relatively low costs. So again, it's a bit of a crystal ball exercise. There are arguments on both sides. Finally, Bertrand, could we possibly leave the crystal balls aside and see some more likely scenarios for Israel and Ukraine? Could these be areas where Congress might have more say? Because after all, for both, military and financial support, which they have a bigger say over, has really been the backbone of U.S. policy. Yes, and I think on Israel, we can say that there seems to be a distancing between the U.S. and Israel on the horizon. The policy of Israel probably played a role in the election. We have even the president appearing to recognize this by announcing shortly before the election that he would end military aid to Israel starting next year, which is a big deal. And we have some candidates who have been elected on a platform of withdrawing this aid as well. And that's an area where Congress has a lot of power. On Ukraine, I think things don't necessarily look a lot rosier from Kiev's perspective. On the one hand, yes, funding appropriate. All this is in the hands of Congress, and that could help increase at least the flow of weapons to Ukraine if they're financed largely by Europe these days. In terms of the negotiations for peace, the concern in Europe and in Ukraine has long been that Trump would lean towards an outcome or a settlement that is on terms that are favorable to Russia and unfavorable to Ukraine. I think the likelihood of that remains because if you're the Chinese leader or the Russian president, you're looking at Trump now. a quick end from that conflict on terms that may not be favorable to Ukraine. And, you know, a lot will depend on the talks that Trump will have with the Chinese leader and the Russian president very soon. Got it. Moscow, Beijing, both just sort of jumping over Congress and taking their priorities straight to the Oval Office. I've been speaking to Wall Street Journal Germany Bureau Chief Bertrand Benoit. Bertrand, thanks so much. Thank you. Coming up, U.S. voters just went to the polls with a cost of living in mind. And central bankers around the world are warning that there's more pain to come. A little relief in sight. We've got that story and more after the break. Well, the biggest concern for voters in the recent midterms was the cost of living. And this week, central banks in Australia, Brazil and Sweden have warned that high consumer prices are here to stay. Today, the Bank of England, is also expected to hike rates following the BOJ and Fed in doing so in the wake of the Iran war. Economics reporter Chelsea Delaney has more. If you look at what the markets are pricing, what investors are expecting from central banks all around the world, they think more rate increases are coming. The Bank of England is expected to raise rates even after today, another percentage point over the next year. The Federal Reserve is expected to raise rates a couple more times. The ECB also expected to raise rates again. So, we're going to have to wait and see. The earnings are not over yet. There's still a ways to go before we start to see some sort of normality. Well, those higher borrowing costs are really hurting the housing market. Real estate marketplace Zillow yesterday reported a decline in traffic to its apps and sites in the midst of what CEO Jeremy Waxman called one of the toughest housing markets in a generation. Structurally, the buyers who are there and the seller buyers who want to sell and buy are there. They're just either stuck on the sideline, forced to be stuck on the sideline, or, you know, scared by the rate shock. The housing market has ground to a halt since a bond sell-off in recent months brought mortgage rates to their highest point in almost three years. Still, in a letter to shareholders that cited data from the National Association of Retailers, Zillow said its revenue grew 7% in the third quarter compared to last year, while the overall housing market, it said, only grew 1% in the same time period. However, shareholders didn't find any comfort in that comparison, with Zillow's stock plunging 16% in off-hours trading. Zillow's stock plunged 16% in off-hours trading. Shortly after the company reported its results. Having a little bit more fun in the current market are Nintendo and Sony, which have both reported a jump in profits, thanks in part to recent blockbusters. There's a huge universe out there. Nintendo says that its first half net profit jumped 11%, driven by an 88% surge in intellectual property income following the hit release of the Super Mario Galaxy movie. Those strong earnings highlight the Japanese gaming giant, push beyond traditional gaming into films, theme parks, and broader entertainment to reach new audiences. And that comes as Sony raised its annual earnings forecasts after this year's Spider-Man film boosted profits after pulling in over $900 million worldwide this summer. Because I'm not just Peter Parker. I'm Spider-Man. Sony's better-than-expected results come as the company has spent billions on acquisitions and joint ventures, including with the likes of TSMC, to build a new company. And that's it for What's News for this Thursday morning. Today's show was produced by Daniel Bach and Hattie Moyer. Our supervising producer is Sandra Kilhoff. And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. And until then, thanks for listening.