China's central bank cut benchmark interest rates by 25 basis points (0.25 percentage points) on Thursday in a surprise move to shore up slackening economic growth, its first rate cut since the depths of the 2008/09 financial crisis.
The new rate of 6.31% is effective from June 8, the People's Bank of China said. The PBOC also cut deposit rates by 25 basis points to 3.25%.
The consensus view of economists had been the PBOC would refrain from an outright cut in 2012 and instead cut the required reserve ratio of the country's banks to boost credit creation and deliver money supply growth in line with the 14% official target.
"This is very positive for risk appetite and is indicative PBOC are there to support the Chinese economy," said Michael Sneyd, a currency strategist, BNP Paribas.