The Fed is widely expected to take interest rates a notch lower today, but it may have more in store for market watchers.
Wall Street expects the Fed to announce what are called reserve management purchases, buying bonds to maintain liquidity in the system and smooth out disruptions investors have seen in the short-term financing markets.
It is an issue because there is now less money in the financial system to cushion the market against a blow. The cash that banks keep at the Fed now totals about $2.9 trillion, versus more than $4 trillion in 2021. The reverse repo market, another place institutions can park cash, is now seeing only a few billions of dollars come in each day, versus trillions at its peak.