By Stella Qiu and Wayne Cole

SYDNEY (Reuters) - Australian consumer inflation accelerated to a six-month high in May, while a key measure of core prices rose for a fourth month, figures that caught traders off-guard and prompted markets to raise the chances of another interest rate hike this year.

The Australian dollar climbed 0.4% to $0.6677 and the three-year bond futures tumbled 14 ticks to 95.97, their lowest level in three weeks.

Markets moved to imply a 50% chance of a quarter-point hike from the Reserve Bank of Australia by September, up from 12% before the data, with a move likely in August depending on the outcome of the full second-quarter CPI report.

Futures also priced out any chance of a cut in the 4.35% cash rate this year, and had only 17 basis points of easing implied by the end of 2025 compared to 44 basis points early in the day..

Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index (CPI) rose at an annual pace of 4.0% in May, up from 3.6% in April and well above market forecasts of 3.8%.

The CPI dipped 0.1% in May from April.

A closely watched measure of core inflation, the trimmed mean, climbed to an annual 4.4%, also its highest level in six months and up from 4.1%.

"Australia could be one of the very few developed markets to raise rates," said Russel Chesler, VanEck Head of Investments & Capital Markets.

"Forget ‘higher for longer’ – we may end up being the ‘highest for the longest’."

With inflation still running above its target band of 2-3%, the RBA has warned it is alert to upside risks. It has held interest rates steady at a 12-year high of 4.35% for five straight meetings.

The central bank will have the luxury of waiting for the quarterly report due at the end of July to decide on its next policy move. But hot readings for April and May suggest the second quarter inflation data could be as strong or stronger than the first quarter report, putting pressure on the RBA to hike in August.

Tapas Strickland, head of market economics at NAB, noted that travel costs in May did not fall as much as analysts were expecting and service prices for telecom and insurance were high.

Indeed, when volatile items and holiday travel were excluded, the CPI dipped to 4.0%, from 4.1%.

"If that quarterly inflation report does print say 1% q/q or a bit higher, then I think it's going to be very hard for the RBA to be on hold," said Strickland. "We're not there in terms of calling (a rate hike), but that risk is clearly growing."

The report showed electricity prices jumped by an annual rate of 6.5%, picking up from April's 4.2% rise, due to the unwinding of government rebates, although they are set to ease from the third quarter as new cost of living relief from the federal and state governments kicks in.

Rent surged 7.4% while insurance costs jumped 14%.

The May report, which provided an update on more services in the second quarter of the year, showed prices for haircuts, restaurant meals and takeaway food were up 5.5%, 4.2% and 4.3% annually.

"We’re still of the view that it’s more time not more hikes that’s needed to quash inflation. But we’re getting a little less steadfast in that conviction," said Harry Murphy Cruise, an economist at Moody’s Analytics.

"An August hike now can’t be ruled out."