China's central bank cut benchmark interest rates by 25 basis 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.
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The new rate of 6.31 percent is effective from June 8, the People's Bank of China (PBOC) said in a brief statement on its website. The PBOC also cut deposit rates by 25 basis points to 3.25 percent.
In the wake of the announcement, U.S. stock futures surged.
"China's move should help support the stocks rally that we have seen in the market over the past days," said Keith Bowman, equity analyst at Hargreaves Lansdown in London.
The consensus view of economists had been that the PBOC would refrain from an outright cut to interest rates in 2012 and instead cut the required reserve ratio (RRR) of the country's banks to boost credit creation and deliver money supply growth in line with the 14 percent official target.
"This is very positive for risk appetite and is indicative PBOC are there to support the Chinese economy. If anything I am surprised the moves so far look quite muted,'' said Michael Sneyd, a currency strategist at BNP Paribas.
"We would expect to see more investors put on risk positions,'' he said. Read more
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