Americans are being pinched by rising prices and grueling debt - and the pain isn't going away soon, analyst says

• Higher prices and interest rates are pressuring consumers and companies, Stephanie Pomboy says.
• Disposable incomes are shrinking, and businesses face cost pressures, the Macro Mavens chief says.

American households and businesses are being squeezed hard by inflation and steeper borrowing costs — and the pain is far from over, a veteran analyst has warned.

Consumers are spending a bigger chunk of their budgets on housing, healthcare, energy, and food, forcing them to cut back on discretionary purchases, Stephanie Pomboy told Fox Business on Friday. The upshot is that overall consumer spending has remained buoyant in recent months, but retail sales have barely budged, she said.

Meanwhile, businesses are suffering a "migraine" in the form of higher debt costs, the Macro Mavens founder and president said. Interest expenses for S&P 500 companies have surged 71% over the last year to reach their highest level since 2008, she continued.

"Expect rates to dampen economic activity and to create real stress in the credit markets, corporate credit market especially," Pomboy said.

Some Wall Street analysts have argued that corporate profits bottomed last quarter, and will rebound to double-digit growth next year.

"Nothing I look at suggests that," Pomboy said. She pointed to the pressure on consumer spending, the limited supply of labor, and striking workers raising companies' costs by driving up wages and securing settlements.

Pomboy has been issuing grim predictions for a while. In March, she warned the bursting of an "everything bubble" could tank stocks by 30% and cause a 2008-style economic collapse.

Inflation surged to a 40-year high of 9.1% last summer, spurring the Federal Reserve to hike interest rates from nearly zero to north of 5.25% today — a 22-year high. Higher rates can ease upward pressure on prices by encouraging saving over spending, hiring, and investing. But they can also sap demand, increase unemployment, drag down asset prices, and cause a recession.

Several commentators, including Nobel Prize-winning economist Paul Krugman, have proclaimed the inflation threat has faded. They believe the Fed can pull off a soft landing, where it reins in price growth without tanking the economy. Other experts aren't convinced.

"The Federal Reserve is really slowing down the economy, it has its foot on the brakes," Robert Heller, a former Fed governor, told Fox Business in a separate interview on Friday.

However, the central bank's tighter monetary policy has been offset by vast amounts of government expenditure, the retired banker and economics professor noted.

"That's the foot on the gas pedal, and that has prevented us from going into a recession so far," he said.

Heller warned the current volume of fiscal spending is "unsustainable," and predicted it wouldn't last. He suggested a recession could hit toward the end of this year, or early next year.