The consumer price index for May, the standard yardstick for measuring monthly inflation, was released on Friday, and it showed prices hitting yet another 40-year high. The CPI soared 8.6% over the last year, with the biggest price surges coming in fuel, food, and housing.

Price increases in food and fuel have made life more difficult for every American, but housing took by far the biggest bite out of May’s price hikes. The latest CPI marks a 0.6% increase over last month’s core inflation, and 0.24% of that increase came down to housing. That means rising housing costs accounted for 40% of the price hikes in the latest core inflation numbers.

The CPI splits housing costs into two categories to account for both renters and homeowners. Households who rent their homes are relatively easy to tabulate, as the CPI simply figures in their monthly rent. For homeowners, the CPI uses a metric that calculates how much it would cost homeowners to rent a similar house.

Housing costs account for nearly a third of the CPI basket. Critics have argued that the way the CPI calculates housing can be inefficient and even fails to recognize the emergence of housing bubbles. But the large portion of the CPI occupied by housing means that these costs tend to be an oversize driver of inflation.

Rents were rising in 2021 but did not start figuring into inflation until earlier this year, as it can take up to 12 months before inflation starts sniffing out rent surges. But with rents now up 15.3% over last year, housing costs are beginning to play into inflation in a big way.

Asking rents have been rising fast since the beginning of the year, as a national housing shortage pushed more and more prospective homebuyers to continue or return to renting.

The national median monthly asking rent in May surpassed $2,000 for the first time, and in some cities, it’s way off the charts. In Manhattan, where rents have been surging at double the national rate for months, the median rental price is now just shy of $4,000. And given New York City landlords’ infamous requirement that renters’ salaries be 40 times higher than their rent, renting a one-bedroom apartment in Manhattan is only an option if you can boast a $160,000 salary.  

For homeowners, the situation is even worse. Despite a surge in mortgage rates that have helped cool off the historically hot homebuyers’ market that has seen home prices soar 19.8% over the past year, the housing market boom is forecast to continue climbing for another year at least.

And for as long as rents and home values stay high, inflation is likely to persist.

In a report shared by the Federal Reserve in February, analysts predicted that future rent inflation could increase by around 3.4 percentage points in both 2022 and 2023, which would translate to 1.1 percentage point increases in CPI inflation both this year and next.