September was conditioned by the movements of the Federal Reserve and mixed macroeconomic data in the United States, due in particular to the decline of the labour market. Within this context, the Fed applied a 25-basis-point cut to the official rate, which fell to a range lying between 4.00% and 4.25%. Powell expressed his willingness to continue easing the monetary policy if the labour market continues to display signs of deterioration. Fed Funds futures have now factored in cuts amounting to an additional 44 basis points by the end of the year, even though inflation remains at high levels. In contrast, the European Central Bank kept its rates unchanged and adopted a cautious stance in view of the general inflation rate, which remained contained at 2.0%, a figure in keeping with its objective. However, the risks of rising inflation caused by the tariffs and the moderate growth of the Eurozone economy are factors that are being closely monitored by Lagarde.

Expectations of further cuts in the US drove the global stock exchanges to record highs, despite September being a typically bearish month for the stock market. On Wall Street, the Nasdaq 100 technology index posted a significant 5.40% monthly increase. The S&P 500 (+3.53%) and, more modestly, the Dow Jones (+1.87%) also recorded rises. A degree of contagion was observed in Europe; the Eurostoxx 50 rose by 3.33%, while the Ibex 35 continued to be the best index on the continent with a 3.61% monthly rise (33.46% so far this year). In the commercial sphere, the White House approved a new round of tariffs on several products, including one of 100% on patented pharmaceuticals. In the political world, Macron appointed Lecornu as the new prime minister of France after the fall of the government led by Bayrou.

October has begun with the shutdown of the US Government.

The US federal government entered shutdown today, 1 October 2025, after Congress failed to pass a resolution enabling funding to continue. Although the immediate effects on the economy may be limited if the shutdown is short, the risk of damage will grow in a non-linear manner as the length of the disruption in the funding increases.

Key dates and state of the negotiation

• Funding deadline: 1 October 2025. With none of the 12 annual appropriations bills or a temporary resolution passed, discretionary spending (approx. 25% of the federal budget) has been suspended.
• Negotiations at a standstill: Both houses of Congress remain polarised with very narrow majorities, reducing the margin for a rapid agreement.

Potential macroeconomic impact

• A brief shutdown will have little effect on GDP, but the impact will become more significant after several weeks, mainly due to the downturn in consumption by unpaid federal employees and delays in contracts with the private sector.
• The last extended shutdown (2018-2019) reduced the level of real GDP by 11 billion USD, 3 billion USD of which weren’t recovered.

• The CBO estimated that real GDP growth fell by 0.3% in the 2018-2019 period, a prolonged repetition could once again damage aggregate demand.
• Even if essential services (Social Security, Defence, etc.) were to operate, reduced spending in other departments would entail lower borrowing needs, altering the dynamics of the Treasury’s auctions.

“A complete government shutdown leading to the temporary lay-off of 800,000 federal employees would reduce the annualised quarterly growth of real GDP by about 0.2 points per week...”

Deutsche Bank, Brett Ryan 

Effects on federal employment

• Approximately 750,000 employees could be sent home without pay, with nearly 400 million USD of remuneration withheld each day.
• Although some essential workers (the military, law enforcement officers, etc.) will remain active, they won’t be paid until the shutdown is lifted.

Impact on the financial markets

• The stock markets tend to recover from short shutdowns with initial falls and rapid recoveries, although greater volatility is possible, given the high valuations and recent downgrades of the sovereign rating.
• Historically, the performance of the 10-year T-note has fallen by an average of 14 bp during shutdowns lasting longer than one day; a prolonged one could intensify this decline, although the magnitude is expected to be limited, provided that the debate over the debt ceiling doesn’t return.

Affected services and programmes

• The following will continue to operate: Social Security, Medicare, Medicaid and SSI payments, as long as the shutdown doesn’t last more than around three months.
• The following have been halted or delayed: Approvals of new SBA loans, FDA/EPA inspections, issuing of certain permits, data validations for mortgages and IRS tax returns.

Conclusions

• The US economy can absorb a shutdown lasting a few days with minor damage, but from the second or third week onwards the effects on growth, consumption and business confidence would increase significantly.
• Since neither party would like to incur the political cost of a lengthy standstill in a pre-election year (the mid-terms will be held on 03/11/26), the market continues to anticipate a resolution in a matter of weeks; however, the polarisation in Congress continues to be the main downside risk.