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With oil inching up towards $80 a barrel and an unexpected hike in apparel and housing costs, the market expects the Fed will pull back on further rate hikes. Apparel prices rose 1% higher in March. Home and shelter costs, which comprise 33% of the overall CPI increased by 0.4% for a second month in a row.

While the FOMC minutes imply that the Fed is done raising rates for a while, a letter from Chairman Ben Bernanke to Rep. J. Gresham Barrett suggests that the Fed chief may not see it that way. In the correspondence, Bloomberg reported, Bernanke tells Barrett that higher energy costs won't stoke price increases in other goods over the long run if the Federal Reserve can keep inflation expectations in check through interest-rate moves.

Bloomberg notes that in the past, the Fed has insisted that stable prices are a "prerequisite" to achieving high employment and moderate interest rates. Bernanke writes: "The rise in energy costs has had a significant impact on overall or 'headline' inflation and has likely also affected core inflation, which excludes fuel prices."

"The overall increase in the Labor Department's consumer price index for March matched expectations on Wall Street, but a 0.3% rise in prices excluding food and energy was a bit swifter than forecast," reported Reuters upon yesterday's release of the CPI numbers. Apparel prices rose 1% higher in March. Home and shelter costs, which comprise 33% of the overall CPI, increased by 0.4% for a second month in a row.

Airlines are raising ticket prices due to substantial run up in their fuel costs, and as yesterday's CPI indicates increasing prices, the Fed may not be done as soon as the market expects.

So just to be on the defensive side, I would add positions in UnitedHealth (NYSE:UNH) amidst its troubles of CEO compensation, Colgative Palmolive (NYSE:CL) and Procter Gamble (NYSE:PG).

Source: The Fed May Not Be Done As Soon As The Market Expects