Bloomberg has reported that China has raised its interest rates by 0.27%, taking the lending rate to 5.58% and the deposit rate to 2.25%. This is the first time rates have risen in China for 9 years and is a stepping up in the Government's efforts to control China's economic growth and inflation. The flipside is this will increase pressure on China's currency to appreciate/revalue as even more foreign money is sucked in to chase these higher yields. This was a difficult choice facing China and they've opted for domestic economic control at the possible expense of their control over the currency. China has also removed the ceiling on bank lending rates, a small deregulatory step in freeing up the financial system.

It makes this article look pretty stupid.

The announcements are in Chinese on the PBoC website: here and here.

Developing...

Update: the reaction so far? The US dollar has strengthened against all the major currencies, commodities are getting hit e.g. copper's down 1.6%, gold's down, US Treasuries down in price, commodity company shares down e.g. BHP down 3.3%, Rio and Anglo American 2% and likely more Chinese rate rises to come. This is going to have a far bigger economic impact on the world than whatever happens in America next Tuesday.