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Fed Minutes Point To Need For Yet More I R Hikes

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Wall Street wobbles after release of Fed minutes

JOE BEL BRUNO, AP Business Writer

August 29, 2006 11:48 AM

NEW YORK (AP) - Wall Street wobbled Tuesday after minutes of the last Federal Reserve meeting on interest rates showed that the central bank believed
more rate hikes might be needed to slow inflation
The minutes released in mid-afternoon sent the major indexes plunging, rising and then falling again as investors were taken by surprise by comments from Fed officials that another rate increase ''could well be needed.'' Given increasing signs of a slowing economy - due in part to the Fed's 17 rate hikes since June 2004 - Wall Street had become cautiously optimistic that the Fed might indeed be done raising rates.
The Fed minutes compounded the market's earlier disappointment over the Conference Board's consumer confidence index, which fell further than expected and raised the possibility that the
economy may be moderating faster than hoped
. The combination of slow economic growth and rising rates could well hurt corporate profits in the quarters ahead.

More IR pain to come. :o

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You've got 300,000 Yanks guzzling down fuel at record prices. Perhaps the Fed already knows how far they'll have to go but are trying to placate the masses by breaking the news slowly? Business has been given the green-light to pass on the energy costs so why would inflation subside without a serious shock. It has been reported here before that the Fed may have to go too far in order to correct the problem. I believe this is exactly what they'll do and we end up with a recession.

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