Bank of New York, the branch of the Fed responsible for Open Market Operations, released a statement today. As of Today September 20, 2019, we know that the Fed is scheduled and about to pomp up to $1.2 trillion in a matter of 3 weeks, $75 billion daily, as a result of the sudden lack of liquidity occurring in the Repo Markets this week.
This is on top of the $278 billion of capital already injected in the markets over the past 5 days. To give you a quick perspective and compare to 2008 levels, with just the $278 billion this week, we are already at 39% of the $700 billion bailout signed by Congress and President Bush on 10/3/2008.
How did this all start?
On September 17th, Repo rates hit 10%, the largest spike in more than 4 decades. Repos are short-term loans mainly taken out by large financial institutions such as investment banks and hedge funds to be used in their daily bond trading, market making, and brokerage operations. When liquidity gets tight, rates respond by rising sharply. To take things back to normal, Fed has to step in with liquidity to keep the rates at their target so that the financial system can continue its normal operations.
This magnitude of movement is unprecedented since pre 2001 and 2007-8 levels as you can see below.
This was announced after the "unscheduled meeting" of the FOMC usually occurring at times of emergency. It is worth mentioning that this is the first unscheduled meeting since March and October of 2008.
Fed announced another 0.25% interest rate cut to the Fed Funds Rate just this Wednesday, the second cut in 2019 since the pre 2008 crisis rate cuts. Fed Funds might very well be on track to zero and further into negative effective rates. Putting this into a global perspective, the Fed still has lots of catching up from a monetary easing and quantitative easing to do given how the rest of top world economy central banks have cut rates and printed money already.