The Federal Reserve meets on Tuesday and Wednesday, October 27 and 28, with a rate decision due on Wednesday afternoon. It is the second meeting since the Fed raised rates for the first time in more than three years, and small business owners have good reason to watch closely.
Where Rates Stand
On September 16, the Federal Open Market Committee voted 12-0 to lift its target range by a quarter point, to 3.75% to 4.00%. It was the first increase since July 2023 and the first policy move of 2026, and it was also the first rate decision under Fed Chair Kevin Warsh, who took office in late May. The Fed said inflation remains elevated, while economic activity is growing at a solid pace and the unemployment rate has changed little. It stood at 4.1% in July and August.
What the Fed Is Signaling
The Fed’s latest projections point to more tightening. Of the 18 officials who submitted forecasts in September, 12 expected the year-end rate to land around 4.125%, and four expected it to be higher still. Only two saw rates staying where they are. In plain terms, most officials expect at least one more quarter-point increase before the year ends. The committee’s remaining 2026 meetings are this week and December 8-9.
Why It Matters for Small Businesses
Many small business loans are tied to the bank prime rate, which usually moves in step with the Fed’s target. When the Fed raises rates, the cost of several common products tends to follow:
- Lines of credit and variable-rate loans: monthly interest costs can rise soon after a Fed hike.
- New equipment and expansion loans: borrowing for large purchases gets more expensive, so projects that looked affordable earlier this year may need a second look.
- Business credit cards: most carry variable rates, so carrying a balance costs more.
- Savings and cash reserves: on the positive side, business savings accounts and money market funds generally pay more when rates climb.
Practical Steps Before the Decision
Owners do not need to guess what the Fed will do. They can prepare for either outcome. Start by listing every variable-rate loan and credit line you carry, with the current balance and rate. Ask your lender whether converting some debt to a fixed rate makes sense, and compare the cost against the risk of further increases.
Clean books make these decisions easier. A cloud accounting setup, like the one we covered in why cloud-based accounting tools lead the way, shows your cash flow in real time, so you can see how a higher interest bill fits into your monthly numbers. Rising costs elsewhere also deserve attention. Our report on small business health insurance trends is a useful reference when you are reviewing your biggest recurring expenses.
What to Watch on Wednesday
Beyond the rate itself, watch the wording of the Fed’s statement and Chair Warsh’s press remarks for hints about December. If the language on inflation stays firm, expect lenders to keep pricing in higher rates. This article is for general information only, so talk to your lender or a financial advisor about your own situation.
