China’s central bank cut the country’s benchmark interest rate for the first time in more than six years last night, in the face of global financial turmoil and signs of a slowing domestic economy.

The People’s Bank of China lowered the one-year lending rate by 27 basis points, to 7.2 per cent per annum, after years of gradual rises aimed at fighting inflation and reining in what some saw as an overheating economy.

The PBoC also said it would reduce the amount that smaller domestic banks must hold in reserve with the central bank by one percentage point to 16.5 per cent from September 25, freeing up funds for those banks to lend. That will be the first drop in the reserve rate requirement since 1999 but does not extend to the country’s five largest banks or the postal bank.