The People's Bank of China (PBOC), the central bank, halted its efforts to inject liquidity into banks through open market operations this week, renewing speculation that the PBOC may move to ease its monetary policy soon.

Through reverse repurchase agreement (repo) operations on Thursday, the PBOC drained 52 billion yuan (8.2 billion U.S. dollars) of liquidity from the money market this week after pumping 344 billion yuan into banks last month through similar actions.

The liquidity tightening came after the central bank used repos to buy40 billion yuan in securities from banks with terms of seven and 14 days and hedged against bills and repos due this week.

The yield for seven-day reverse repos dipped 5 basis points to 3.35 percent, while that for 14-day reverse repos remained unchanged at 3.5 percent.

The PBOC may introduce a new parity for short-term borrowing, analysts said, as the central bank has carried out reverse repo operations for 11 consecutive weeks since June 26.

"I think the central bank's lowering of seven-day and 14-day reverse repo yields signals its intention to bring down borrowing costs," said Mou Zhiyang, a fixed-income researcher with China Dragon Securities. "But the impact on the market has been limited, since it was just five basis points."

In China's interbank market, the overnight Shanghai Interbank Offered Rate (Shibor), which measures the cost of interbank borrowing as a key barometer of liquidity, dropped 1.38 basis points to 2.12 percent on Thursday.

The one-week Shibor weakened 2.58 basis points to 3.40 percent, while the two-week Shibor climbed 21.04 basis points.

The market expects more monetary loosening from the central bank in the form of interest rate or reserve requirement ratio cuts in order to buoy the slowing economy.

But a possible rebound in inflation may limit the government's room for policy-easing and leave the central bank in a dilemma, as different sets of predictions indicate that the inflation rate will bounce above 2 percent in August from a 30-month low of 1.8 percent in July.

The National Bureau of Statistics is due to release economic data for August on Sunday.