The central bank's announcement comes as a slew of crucial economic data will be released this week.All eyes are on Thursday, when China's National Bureau of Statistics will publish the July figures for inflation, industrial added value, fixed-asset investment, retail sales and more.

The most closely-watched is of course the Consumer Price Index, which fell to a 29-month low of 2.2 percent in June, far below the government's official 4 percent target this year.

On the back of slowing economic growth, economists are predicting price pressures will continue to ease. Some expect theCPIto have risen less than two percent last month. In the meantime, the Producer Price Index, or wholesale inflation, is estimated to have dropped further to 2.5 percent in July.

The severe droughts in the US will however push up international grain prices, but analysts say the impact on China will only be seen as late as next year. The indicators for the real economy might see some improvements in July as the effects of the government's pro-growth measures are gradually emerging.