Annual inflation came in slightly below the range of forecasts by economists in May, but accelerated significantly to 4.5% from 4% in April, keeping the possibility of another interest rate increase at play when the South African Reserve Bank (Sarb) holds its next monetary policy meeting in July.The year on year increase in the consumer price index (CPI) was driven mainly by the housing and utilities division, which accelerated to 5.3% and contributed 1.3 percentage points, Statistics South Africa said on Wednesday.The rate for transport climbed to 9.4% and also accounted for 1.3 percentage points in the headline number, reflecting the effect of steep fuel price increaases since early April as the Middle East conflict has driven global oil prices higher.Insurance and financial services came in at 5.7% and added 0.6 percentage points to the May annual inflation number.On a month on month basis, consumer prices were up 0.7%, Stats SA said.Inflation is now firmly outside the 2% to 4% tolerance band of the Sarb’s 3% target. The bank hiked the benchmark interest rate to 7% at its May policy meeting after data showed inflation quickened to 4% in April from 3.1% previously. Governor Lesetja Kganyago later acknowledged the bank acted preemptively before the full effect of soaring fuel prices materialised, but added waiting for full proof before acting might have been leaving it too late.“You can’t do much about initial shocks with interest rates, but it does not follow that you should do nothing. Inflation can be persistently higher after a shock has passed if people start believing higher inflation is normal,” Kganyago said at the annual Bureau for Economic Research conference.He also rejected the suggestion the bank abandon the lower 3% inflation target it adopted last year and revert to its 3% to 6% band.