Cannot resize vertically, bounding box visible, can resize horizontally

This problem started seemingly at random, it didn't start after pressing any particular key as far as I know. I can resize objects using the handles on the bounding box horizontally but not vertically. Actually I can make objects bigger along the vertical axis, but not smaller! If I rotate the object 90 degrees, I can then use the horizontal handle to resize it, then rotate it back, but that's annoying and time consuming. I can also use the scale tool and transform palette to change size, but again, I really need the speed and convenience of being able to free transform with the regular bounding box handles and the selection tool. I tried restarting and opening new documents, activating and deactivating all the snap to settings, turning bounding box on and off etc. (wild stabs in the dark in other words!) I can't find any solutions or even mentions of this problem anywhere online. Help!