Last Updated September 17, 2025
Key Takeaways
-
The Federal Reserve reduced its lending rate to 4–4.25%, marking the first cut since December 2024, though board members were not unanimous in the decision.
-
Despite moderate economic growth and low unemployment, inflation pressures and tariffs contribute to an uncertain outlook.
-
Small business owners should monitor rate changes and economic trends closely, as even slight shifts can significantly impact debt payments and customer behavior.
Consumers hoping for relief from elevated interest rates can breathe a slight sigh of relief, as the Federal Reserve announced on Wednesday it will be decreasing the lending rate to a range of 4-4.25%.
While this marks the first rate reduction since December 2024, it was the second consecutive meeting without unanimous approval over the decision. Stephen Miram, newly elected to the board, voted in favor of a half-point reduction. In July, during the Fed’s previous meeting discussing a potential rate cut, multiple board members supported reducing rates, but the decision ultimately left them unchanged.
Despite the rate cut, the Fed’s official statement did not convey complete optimism.
Among positive trends mentioned were moderate growth in economic activity and low unemployment. However, the job market remains a struggle, and inflation is inching back up, largely due to recent tariffs. These factors contribute to an uncertain long-term economic outlook.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run,” the statement read. “Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment have risen.”
One strong signal? Economic and market futures are trending higher in terms of the probability of another rate cut in October. Following Wednesday’s decision, the probability of a further cut in October stood at 86.0%, compared to 71.6% prior to the announcement.
However, the Federal Reserve is projecting only one rate cut in 2026, fewer than expected according to its median projection.
When rates were at a 23-year-high throughout 2023 and 2024, the Fed set a target rate of 4.50-4.75% by December 2024 and 3.50-3.75% by the end of 2025.
The next chance for Americans to see rates further eased will come following the board’s upcoming meeting on October 28-29.
What This Means for Small Business Owners
Changes in interest rates often hit small business owners and startup owners the hardest. Even a slight change can have big impacts on debt payments and the ability to qualify for loans or other forms of credit.
altLINE Senior Vice President and General Manager Jim Pendergast advises small business owners to keep tabs on rate changes, economic conditions, and other important decisions from the Federal Reserve that can affect their operations.
“Rate changes and other economic factors don’t just affect your own operations, they also affect your customers’ operations,” said Pendergast. “Economic shifts involving rates and tariffs can further incentivize or disincentivize customers from purchasing your goods or services. Make sure to stay in the loop.”
The most successful small business owners tend to be vigilant when it comes to these economic trends. The Fed’s skepticism and uncertainty regarding the outlook moving forward makes this even more pivotal. Additionally, the impacts from record-high tariffs have already been felt by many SMBs.
Business owners should consider financials such as EBITDA to gain insight into business performance while isolating expenses like interest payment.
Michael McCareins is the Content Marketing Associate at altLINE, where he is dedicated to creating and managing optimal content for readers. Following a brief career in media relations, Michael has discovered a passion for content marketing through developing unique, informative content to help audiences better understand ideas and topics such as invoice factoring and A/R financing.
