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If you do not have an OBD-II reader, get someone to read the code associated with the CE light. Dollars to doughnuts it will be a misfire in one or more cylinders. If so, johnk's assessment is on the mark: plugs, points, etc.
Same thing happened to my 98 V70 T5M right after I did my MOTRONIC+ upgrade: revved into the 4K range, had about 10 psi boost ... then boost dropped and engine sputtered/hesitated. After plug replacement, never happened again. I will relay what the experts on the Brick Board said to me: OEM Volvo plugs only, and make sure they are the ones for a Turbo.
Let us know what happens.
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Dave in Virginia; 98 V70 T5(M); 98 V70; 88 245 DL; 67 MGB
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