In today's money market activity, the PBOC injected 290 bn yuan through 28 day reverse repos and 110 bn yuan through 7-day reverse repos, the largest seen in 3 years. Could we consider this as a signal that the central bank will use lesser RRR cuts in the near future?

We should note that the move comes in ahead of the Lunar New Year holidays, and it is generally observed that people stock up on cash before the long celebrations causing a liquidity squeeze. The PBOC's move could definitely reduce the need for RRR cut in the near future, but the central bank remains under pressure to ease policy to support the slowing economy.

Chief economist at the People's Bank of China, Ma Jun cautioned against relying too much on lowering banks' reserve requirements to inject liquidity into the economy. He said "Moves by China's central bank to inject over 600 billion yuan ($91.19 billion) in liquidity ahead of the Lunar New Year holidays could substitute for a cut in the amount of cash that banks must hold as reserves."