prices slipped in electronic trading shortly after the Fed announcement
Bullion prices settled higher on Wednesday, 16 February 2016 at Comex. In anticipation of the Fed lifting rates gold and silver prices jumped but then slipped in electronic trading shortly after the announcement. Gold settled before the Fed's decision was released Wednesday at 2 p.m. Eastern.
Gold prices jumped $15.20, or 1.4%, to settle at $1,076.80 an ounce. March silver jumped by 47.8 cents, or 3.5%, to end at $14.248 an ounce.
On Wednesday, the Federal Reserve lived up to expectations, calling for a 25-basis point hike to the federal funds target range, which had been stuck in the 0.00-0.25% range for exactly seven years. Interestingly, today's rate hike did not stop the committee from slightly lowering its core PCE inflation outlook for 2016 to 1.5-1.7% from 1.5-1.8% that had been expected in September.
The Dollar Index displayed some volatility, but ended in the green on Wednesday. The index saw some pressure as Fed Chair Janet Yellen addressed the media, stressing the Fed's intention to stick to a gradual tightening path. Ms. Yellen acknowledged that the rate hike is taking place while inflation is well below the Fed's 2.0% target, but the Fed Chair believes that inflation will return to the 2.0% target once transitory factors fade away.
Economic data at Wall Street on Wednesday, included Housing Starts, Building Permits, Industrial Production, and MBA Mortgage Index. Housing starts were at a seasonally adjusted annual rate (SAAR) of 1.173 million in November. That was 10.5% above October's revised level of 1.062 million (from 1.060 million) and above the consensus estimate of 1.135 million. Building permits soared to a SAAR of 1.289 million. That was 11% above the revised October rate of 1.161 million (prior 1.150 million) and well ahead of the consensus estimate of 1.150 million.
Separately, Industrial production declined 0.6% in November on the heels of a downwardly revised 0.4% decline (from -0.2%) in October The November reading was well below the consensus, which expected a downtick of 0.1%. The November decline was paced by a 4.3% drop in utilities and a 1.1% decrease in mining activities. The weekly MBA Mortgage Index fell 1.1% to follow last week's 1.2% increase.
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