The U.S. Federal Reserve Bank's recent streak of interest rate hikes is beginning to pose a drain on stocks, a senior Merrill Lynch official warned, The Globe and Mail reports. Anticipating a fifth quarter-point interest rate increase by the Fed next week, David Rosenberg, the head North American economist at Merrill Lynch, called the move excessive and "unnecessary" in a recent report. This year, the Fed set a 2% target for the federal funds rate by enacted four separate quarter-point interest rated increases. Despite the Fed's actions, the economy has been slow to create new jobs, holiday sales have remained sluggish and the output gap – which gages the distance between actual market performances and a level economists believe is attainable – remains unlikely to close next year, Rosenberg said. Rosenberg also cautioned investors that advanced warning of the next interest rate hike in next Tuesday's Federal Open Market Committee statement is likely to artificially inflate prices without boosting economic growth above 3% next year.

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