American consumers are increasingly feeling the pressure of high interest rates, which is squeezing their spending power. According to the latest data from the U.S. Bureau of Economic Analysis, U.S. households are currently paying $604 billion annually in interest on a seasonally adjusted basis, equivalent to about $50 billion per month. This is approximately $326 billion higher than in December 2021 and now accounts for 2.5% of disposable personal income, up from the previous 1.5%. Historically, this level typically only appears in the later stages of an economic cycle. Since the era of zero interest rates, the proportion of income spent on interest payments has risen by two-thirds, a staggering increase. This means that for every dollar of disposable income, about one additional cent is now being used to pay interest instead of being spent or saved. On September 16, the Federal Reserve raised its policy rate by 25 basis points, initiating a new rate hike cycle. Traders still expect one more rate hike before the end of the year. The 10-year U.S. Treasury yield rose on Friday, closing at around 5.3%. Earlier this week, the benchmark yield hit its highest level since 2002, while the 30-year yield climbed above 5.6%, marking a 24-year high. Mortgage rates have also risen to around 7.5%. Bond yields move inversely to prices. The Conference Board's Consumer Confidence Index is signaling mounting pressure. The index fell 6.7 points in September to 81.9, the lowest level since 2014 and well below the 89 forecasted by economists surveyed by Dow Jones. The Expectations Index dropped to 63.6, a level that suggests a potential recession within the next year. Moreover, for the first time since this question was introduced four years ago, more respondents believe their current household financial situation is poor rather than good. However, there is a divergence between sentiment and spending. Consumer spending rose by 0.9% in August, but the savings rate dropped to just 4.1%, indicating that households are dipping into their reserves to cover the gap.