China announced a surprise interest rate reduction, Thursday, the first one since 2008.

The People’s Bank of China has cut its benchmark one-year deposit rate by 0.25 percentage points to 3.25 per cent.

Also, the one-year lending rate has been cut by 0.25 percentage points to 6.31 per cent.

“Unfortunately, the rate cut suggests that China’s May economic data, scheduled for release on Friday night, will likely be weak,” observed BMO Capital Markets senior economist Benjamin Reitzes.

“Even so, this is a clear sign that China is in stimulus mode and will do what’s necessary to keep growth from slowing sharply, which will dampen any potential negative reaction to the May data.”

China has been a major force behind the economic recovery, driving prices for commodities higher and supporting higher prices for resource stocks on the TSX.

But those stock prices have taken a beating over the last three months as the eurozone debt crisis worsened and Chinese authorities slowed down the economy to deal with high inflation.