rates on the rise in mortgage land...but....

As predicted interest rates have moved up to 5.49% for the 5 year term - as government bond yields have risen - but will the bank of canada increase rates - I still dont think so...here is what the Globe and Mail has to say

David Dodge's conundrum
TAVIA GRANT
Friday, May 25, 2007
David Dodge has a dilemma on his hands.
On one hand, inflationary pressure has been hotter than the central bank had anticipated, suggesting interest rates should rise. On the other, the Canadian dollar's swift ascent is pummelling Canadian factories, and any rate increase could add fuel to that fire.
Mr. Dodge and other central bank officials will make their decision Tuesday at 9 a.m. EDT on their key overnight lending rate. The rate, at 4.25 per cent, hasn't budged in a year and is expected to remain unchanged next week.
“While the risks of rate hikes have definitely risen, we judge that Canadian dollar appreciation...and the prospects for continued slow U.S. growth will likely keep Dodge & Co. on the sidelines, at least through the summer,” said Michael Gregory, senior economist at the Bank of Montreal, in a report titled “What Will Dodge Do?”.
After that, traders are wagering rates will rise.
Inflation and economic data over the past few weeks have all come in stronger than expected. Core inflation is running at a four-year high and Mr. Dodge acknowledged Monday that inflation is “a little bit stronger” that the bank's projections.
“There are limits to how far the Bank will allow core inflation to stray, regardless of the state of the U.S. economy or the loonie's trajectory,” Mr. Gregory said.
Price pressure prompted economists at the C.D. Howe Institute yesterday to urge the Bank of Canada to raise interest rates — a rare occasion that the think tank differs from the actions the bank will likely take.
“Both headline and core inflation are running ahead of the bank's target, growth in the monetary aggregates suggests that inflation will continue to run above target, and the policy rate is low in real terms,” the C.D. Howe Institute's monetary council said in an agreed statement.
BMO, meantime, believes Mr. Dodge “is still prepared to bet on housing-led U.S. economic weakness ... and decelerating domestic house prices to rein in inflation pressures, with the loonie's rise to 30-year highs providing a previously unanticipated ... but welcome disinflationary bias.'
The bank did, however, change its forecast for a rate hike, saying it will likely take place late this year instead of early next year.
The Canadian dollar traded at 92.28 cents (U.S.) Friday and has climbed almost 8 per cent this year.
© The Globe and Mail

But dont forget another possibly scenario in the USA
The housing market showed stronger than expected new home sales in April - and the economy is moving at a pace exceeding 2% - I think this is based upon a war economy - if the war stops (which I am sure the US really doesnt want to see happen) the economy would be shown to slow dramatically - and the huge deficits being racked up should be bad for the US dollar and good for Gold - longer term

greygoose out