We have a Fed that is cutting rates tomorrow

Today they were dealing with a market demanding higher overnight rates. The IOER cut tomorrow lowers effective interest charges for Treasury at the expense of excess reserves.

The Fed is splitting colors. It is treating the Treasury balance as a separate channel, separate from the regulated overnight markets. The Fed is way off equilibrium, it has cleaved the money markets. That is, it became so slow to react that is it 'aliased' and quantized the side effect, liked a bankruptcy judge might do, separate channel just for guv. 

The regulated bankers are caught dealing with two markets at the short end.  The bankers are in a loop.  This is where the debt cartel steps in, a value added chain the purpose of which is to resolve the cleavage in money markets.

Not now, the split is too great and there is no way to get Treasury back in line except with a Nixon Shock.  The private banking system cannot keep up with the 10% increase in interest charges that Treasury is looking at.  The new debt demands are not adiabatic, the Fed is falling behind, lost its path.

What would a sandbox central banker do?

The sandbox central banker always intervenes in the overnight market as market maker, and does not even try to set rates. It just intervenes, all the time, and allows a separate process to collect seigniorage fees.   What the Fed did today was set an interest swap between risk adjusted deposits and loans, over a well defined representative sample of the economy. And effectively this was cash in advance lending (the Fed noticed the loans and deposits at the same time as everyone else). The Fed did it correctly once, in a decade.

Economists need to understand, they have a very bad central banking model, always have. It suffers This time is different syndrome. It isn't, we will be doing a standard interest swap across all government classes taxpayers soon.