Yuan Haixia, executive dean of the research institute of credit rating agency CCXI, said it may be necessary to tamp down deposit and benchmark interest rates to keep commercial banks' funding costs low, which will create more scope for them to ease LGFVs' debt burden.

Experts said the move will release medium to long-term liquidity of more than 500 billion yuan ($68.7 billion), tamp down banks' funding costs and provide more scope for declines in interest rates and financing costs.

It is also necessary to further tamp down interest rate levels to reduce the cost pressure facing private enterprises and spur their investment activity, said Gong, who is also a professor of applied economics at Peking University's Guanghua School of Management.

The central bank will leverage the market-oriented mechanism of deposit rate adjustment and loan prime rate reform to tamp down the financing costs facing enterprises and consumers while keeping it generally stable.

"The scope for and possibility of loan prime rates declining will remain during the rest of the year, as the cut in the reserve requirement ratio will help tamp down the funding costs of banks," said Yan Se, an associate professor of applied economics at Peking University's Guanghua School of Management.

The People's Bank of China, the country's central bank, has vowed to further tamp down interest rates and down payment ratios of new mortgages while guiding banks to adjust the interest rates of existing mortgages.

On Tuesday, the PBOC also pledged to tamp down interest rates and down payment ratios for new mortgages and promote a decline in corporate and household financing costs, after the central bank and the State Administration of Foreign Exchange held a meeting to organize their work schedule for the second half of the year.

The People's Bank of China, the country's central bank, vowed on Tuesday to further tamp down interest rates and down payment ratios for new mortgages, while guiding banks to adjust the interest rates of existing mortgages, as part of the country's efforts to stabilize the housing market and strengthen countercyclical adjustments.

Feng Jianlin, chief economist at Beijing FOST Economic Consulting Co, said the PBOC may cut banks' required reserves to alleviate their funding costs, which can tamp down the market-based benchmarks of interest rates.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said the over-five-year LPR may further drop in the second half to tamp mortgage rates further down, perhaps triggered by a cut in the reserve requirement ratio.

The need for China to tamp down interest rate levels may have become more urgent as the country's economic rally is grappling with a sluggish recovery in demand and the pressure of debt costs on corporate earnings, political advisers and experts said.

The central bank will work to tamp down corporate financing costs while keeping them generally stable by pushing ahead reforms on loan prime rates — the market-driven benchmark interest rates — and deposit rates, according to the statement.

Looking ahead, the PBOC will keep liquidity reasonably ample to beef up credit support for the real economy, deepen interest rate reforms to tamp down real interest rates facing companies and individuals and strengthen expectation management to keep the renminbi exchange rate generally stable, he said.

Against such a backdrop, Zhang said reducing the reserve requirement ratio — or the amount of cash banks must set aside as reserves — could be a feasible policy option in the coming months to nudge corporate financing costs down, a process that could tamp down the LPRs.

With the space offered by lowering deposit rates and given the need to consolidate recovery in domestic demand, the latest article by the PBOC appears to indicate that the central bank would be willing to further tamp down lending rates in the coming months, experts said.

Shao Yu, chief economist at Orient Securities, said there is still room for China to tamp down interest rates based on domestic economic conditions, as the growing flexibility of the renminbi exchange rate helps absorb the negative impacts of the Fed's tightening.

Lower deposit rates can help tamp down lending rates by reducing funding costs of banks, experts said.

Pan Gongsheng, vice-governor of the PBOC, said earlier this month the central bank will leverage multiple instruments to beef up the injection of liquidity and tamp down corporate financing costs, as part of its efforts to strengthen support for the nation's economy.

Wang Qian, Vanguard's Asia-Pacific chief economist, said that while most of the world starts to tamp down on economic stimulus to tame inflation, China is poised to add fuel to its economy, which will partially offset the impact on global markets of tightening in developed economies.