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There had been a consensus among Israel's economic analysts: the consumer price index would drop by 0.2% or 0.3% in March. A few naturally thought otherwise, but that was the general feeling. Yet the CPI dances to its own tune. It didn't fall, it rose, and not by a wee 0.1% but by a whole 0.3%.

One reason for the dramatic trend reversal was the influence of the shekel-dollar exchange rate on the housing sub-index.

Housing is a heavyweight item in the general CPI. Analysts had generally expected that because the dollar had been relatively weak in March, rental prices would be lower for March than in the previous month. Wrong. The housing index rose by 0.4%. Why? Because of "shekelization" - perhaps obeying the Bank of Israel's call or for some other reason, landlords are increasingly setting their prices in shekels, not dollars. And in shekel terms, prices rose.

Meanwhile, analysts expect consumer prices to climb steeply in April and May. Now factor in the surprisingly high March CPI and what you get is an economy deteriorating to the intensely unhappy condition of slowing growth (not recession, we stress) on the one hand, and inflation.

Forecasting is a hobby for fools. But it's fairly safe to say that the Bank of Israel's gauzy visions of inflation returning to the government-set price stability target range (1% to 3%) in the last quarter of the year isn't going to come true. In 2007 inflation ran beyond the target range and it's going to do the same this year, missing the target on the upside.

Fischer lowered central bank interest rates for February and March by 0.5% each time, to help the dollar regain ground in Israeli business circles. His critics, not that there were many, claimed that given inflation, he should have raised interest rates, not lowered them. Or at least, that he should have left the rates unchanged. The rate cut merely fans the fires of inflation, they said.

Fischer said there was no danger of inflation in Israel because the global slowdown would restrain it in the world and here. He was wrong. You may dream about lower interest rates but it isn't about to happen. Fischer probably won't jack up interest rates at month-end, to avoid admitting his mistake. But the high April CPI will force his hand.