How do I get Fiddler to stop ignoring traffic to localhost?

Question

When using Fiddler to monitor HTTP Requests & Responses in Internet Explorer it ignores all traffic directed to http://localhost.

Answer 1

Internet Explorer has a new feature since IE9 RC: adding <-loopback> to the proxy bypass list causes WinInet (the network library used by IE) to send requests destined for localhost and 127.0.0.1 through the defined proxy.

Here's the original announcement by @EricLaw: http://blogs.msdn.com/b/fiddler/archive/2011/02/10/fiddler-is-better-with-internet-explorer-9.aspx