The 27-year-old has been on the fringes this season with fitness and injury problems preventing regular availability.
With just one league start in eight appearances this season and only two brief cameos from the bench since August, Freedman says a loan move away this week came close with both Wolves and Burnley expressing an interest.
In the end, Molineux manager Kenny Jackett pulled the plug on their bid and it left Davies still part of the Whites squad.
But Freedman is far from unhappy about that and insists any loan was only aimed at getting Davies more regular games – not a precursor to a new year departure just a year after the Scot signed the forward.
The Wanderers boss said: “I felt it would not have been a bad one for four weeks to get him some games and then bring him back in January.
“He’s not started, he’s not got his season going.
“He’s certainly not someone I would like to sell.
“I only bought him a year ago and I think he’s had a bad time with a couple of injuries and his season hasn’t got going yet.
“Burnley was a small possibility.
“There was a small enquiry from chairman to chairman on where do we see Craig. I just said I see him, when fit, in my team.
“There was no real enquiry from the manager to say we’ll take him.
“The only one who really said that was Kenny Jackett at Wolves.
“That was all agreed and it fell down Wolves’ end. They pulled out, they gave their reasons so we moved on.
“Craig will now be staying with us and I have no problem with that.”