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Byline: Michael E. Kanell
Aug. 13--The nation's central bank issued a vaguely optimistic proclamation on Tuesday, using economic sweet talk to woo bond traders.
But those traders have heard it before. Just last spring, the Federal Reserve seemed to promise even more aggressive action to lower rates. Within months, the Fed surprised bond traders with a modest rate cut and backed away from talk of unconventional economy-boosting methods.
Bond traders became convinced that rates would go up -- either because of a strong recovery or the return of inflation. They scampered out of the market, and bond prices fell more dramatically than at any time since 1987. Yields soared, yanking mortgage rates with them.
The Fed's decision…