Stanley Fischer, the governor of the Bank of Israel, has been fighting inflation for the past few months using interest rates. But now, as this tool seems to be less and less effective as rates have risen to 3% after a 0.5% increase in April, Fischer is planning other steps to rein in housing prices, which are the major factor in the local component of inflation.

March inflation announced on Friday, 0.2%, was lower than the consensus of analysts' expectations - but not by much. Their prediction was 0.3%. For the last 12 months, inflation has been running at a 4.3% clip, well over the government's and the Bank of Israel's inflation target for 2011 of 1% to 3%. The bond markets predict 3.7% inflation for the next 12 months based on their pricing models, slightly better news for the central bank.

But a close look at the March, and other recent inflation rate components, shows that the most worrying sector is housing, which is the main factor fueling local inflation, in addition to such factors that are outside of local control such as world oil prices. Housing prices rose 0.5% last month, and they will be a major factor in Fischer's decision toward the end of the month as whether to raise May rates.

In addition, Fischer will be looking into the 17% increase in the total value of mortgages taken in March, compared to February. Most of these home loans are based on variable interest rates, which also worries the central bank.

Last week, the deputy supervisor of Banks, Or Sofer, made permanent a requirement for banks with over NIS 1 billion in outstanding mortgages to report monthly on these loans. They must detail how much of this amount is new and how much is refinancing, and give details on what type of mortgage and what form of interest linkage applies. The central bank also wants to know about the mortgaged properties and their value, payments and schedules for homebuyers, how many loans are overdue and by how much - and more.

The new requirements will allow the Bank of Israel to increase its overall supervision of the mortgage industry, and in doing so, also learn more about the entire housing market, and to plan further steps to control housing prices.

Other changes in the new requirements include monthly instead of quarterly reports on mortgages, as well as more data from more categories. But most important, the changes are a clear sign from Fischer that he intends to examine the housing market much more closely, with a clear intention to do something about the level of prices.