Fed restart month: 25bp cut, stagflation fears ease

September 2025 marked a policy inflection as the Fed resumed cutting after a 9-month pause. The September 17 FOMC delivered 25 bps to 4.00-4.25%, citing "accumulating evidence that post-tariff supply-chain effects are transmitting to growth." The updated dot plot showed 2 additional cuts in 2025 and 4 in 2026, a meaningful dovish shift. Core PCE for August printed 3.0%, still above target but with monthly run-rates softening to 0.2%.

The S&P 500 gained 3.1% on the month as rate-cut resumption and Q3 earnings pre-announcements exceeded expectations. AI capex themes continued driving tech leadership: NVDA +9%, SMH +6%, hyperscaler group +4.5%. Small caps outperformed (IWM +4.2%) on rate-cut sensitivity. Utilities gained 3.5% on both AI power demand and lower rates. Homebuilders (ITB +7.5%) rebounded on mortgage rate declines.

The dollar weakened on narrowing rate differentials: DXY fell 2.2%. Gold gained 4.5% to $3,310, continuing its secular uptrend. Long-duration bonds rallied (TLT +3.2%). Bitcoin closed at $88,500, up 5.5%. The month established that the tariff-stagflation regime was resolving through growth adjustment rather than persistent inflation, the less-bad outcome for risk assets. The 10Y yield closed at 3.95%, below 4% for the first time since March 2025.