Fed Holds Interest Rates in January, Here’s How This Impacts Small Businesses

On Wednesday, the Federal Reserve announced it would hold interest rates steady after several cuts — beginning a “wait and see” phase for the central bank.

This comes on the heels of President Trump demanding the Fed drop interest rates further, showing a firm stance of the separation of the Executive branch and the central bank’s policy.

This is the first of eight meetings in 2025, and experts say significant movement in rates is unlikely. Here’s what you need to know.

The January Federal Reserve Announcement

FOMC unanimously voted in favor of keeping rates where they are, which is 4.25-4.50%.

The labor market remains the optimistic point for the Fed, while inflation remains “somewhat elevated.” The inflation print in December 2024 read 2.9%, further from the central bank’s goal of 2%. They are awaiting new data supporting the effects of their previous rate drops in September, November and December, and how they are impacting economic data.

2025 Predictions and Key Takeaways

As of now, it looks like interest rates for business loans and other financing may stay largely static for the remainder of the year. The Fed does not plan to cut rates further at this time. “We feel like we don’t need to be in a hurry to make any adjustments,” Powell said. Current prediction markets estimate one quarter-point cut at some point this year, according to CME Group data.

However, there is palpable uncertainty in the markets as a new Presidential administration comes with sweeping immigration reform and looming tariffs. Powell said, “We don’t know what is going to be a tariff; we don’t know for how long, how much, what countries, and we don’t know about retaliation or how it will transmit through the economy to consumers.”

For now, business loan rates are expected to remain stable. This is advantageous for small business owners that are considering borrowing for their businesses. Instead of trying to time their borrowing activity to another rate drop, many business owners will find it advantageous to secure funding in the short term at today’s current rates.