Investors say there is now a one-in-three chance of an August interest rate rise after inflation accelerated to its highest rate in six months and economists warned price pressures remained too strong.

Annual inflation jumped to 4 per cent in May, from 3.6 per cent in April, the Australian Bureau of Statistics said on Wednesday. The S&P/ASX 200 closed 0.7 per cent lower at 7783 points, as investors reckoned with the prospect of another interest rate rise.