Dive Brief:

• According to research firm Conlumino, 40% of consumers say they will spend less if an interest rate hike takes place. 

• The Federal Reserve is expected to finally raise its benchmark short-term interest rate when it meets Wednesday afternoon at 2 p.m. Eastern Standard Time. 

• The rate is expected to just top 0.25%; the Fed has kept its rate between zero and 0.25% for more than nine years in an effort to boost the economy.

Dive Insight:

Even a small rate hike could hit retail business, big and small. The dollar will likely strengthen further, and it could dampen employment growth and consumer spending.

Assuming it happens as expected a rate hike would help head off inflation and would be a sign that the Fed has faith in the economy. For several quarters now, the Fed has declined to raise rates, citing sluggish growth in employment.

But retailers could be hit especially hard in the aftermath, especially if, as some believe, the Fed will again raise rates next quarter.

The labor market could take a hit, and that would especially hurt lower- and middle-income workers—the very consumers that already have remained wary of spending despite the improving economy. The hike could also hit spending even if the labor market doesn’t suffer though, as many households, already wary of an iffy economy, say they fear its effects on their pocketbooks, according to a survey by retail research firm Conlumino.

Any purchase made with a loan, like a house or car, would be more expensive, leaving people with less money in the bank for discretionary spending on retail wares. 

"A small rise will probably have a negligible impact on the finances of most households, especially when set against the backdrop of falling gas prices," Conlumino CEO Neil Saunders told CNBC. "But the reality matters less than the perception. Many people perceive a rate rise as a bad thing and fear it will be the start of a series of increases. That may well dampen propensity to spend as people prepare for tougher times ahead." 

To attract this more reluctant spender, retailers will most likely have to ramp up their discounts at a time when the race-to-the bottom is becoming even more competitive. Decreased spending and sales could also lead to store closures and layoffs, even as many brick-and-mortar retailers continue to invest heavily in store improvements and increase their focus on staffing.