How to Profit from the UK's 30-Month High Inflation of 4.5% (FXB)

Prices climbed higher than expected in the United Kingdom during the month of April, with the Office for National Statistics reporting that inflation rose 4.5% at an annual rate.

The 4.5% inflation figure was higher than the 4.2% forecast by economists and well above the previous month's 4% rise.

April's inflationary surge was the biggest single month climb in prices since October of 2008.

With prices climbing higher, there's bound to be speculation that the Bank of England will finally raise interest rates but the Bank of England is hesitant to raise interest rates out of concern that that doing so would hurt the United Kingdom's economic recovery.

However, if British consumers grow weary of higher prices, Bank of England Governor Mervyn King may soon be forced to explain why interest rates haven't been raised from their historically low level of 0.5%.

Those who want to keep interest rates low say that the higher than expected inflation rate is due to short term factors such as higher commodity costs and increased airfares due to the Easter holiday.

They also say that inflation should cool over the next few months and that increasing interest rates now would do more harm to the economy than good.

However, if inflation doesn't start moving down towards the Bank of England's target rate of 2% soon, the chances of interest rates being hiked will increase dramatically.

The British pound was 0.5% higher after the inflation news was released and may see further movement as investors ponder the future moves of the Bank of England.

Investors who feel that the pound will continue to rise higher should take a look at the CurrencyShares British Pound Sterling Trust (NYSE: FXB), which seeks to track the value of the British Pound.

FXB has a daily volume of nearly 41,000 shares traded but that figure will probably move higher as speculation grows over the future of British interest rates.