New York Fed to continue operations in overnight funding market until mid-October

[FBaggins]

3. This isn't related to inflation or money supply

It's a liquidity issue.

The big deal is that banks don't generally go to the fed window in the first place, because borrowing that overnight liquidity from another bank is cheaper. Banks charge each other the Fed Funds rate, which is .5% lower than the discount rate. Banks also avoid it because it hints that there might be something wrong with your A/L management and the other banks won't lend to you. It makes you look bad.

That doesn't appear to be the case here. Instead, there appears to be a general liquidity shortage (not an asset shortage... they have to put up treasury securities as collateral) on the part of banks in general. If it's true that this is due to higher than expected tax payments... it isn't a big deal and should go away quickly. If that $75Billion figure keeps climbing, it could be something worse.

But dump your fears of inflation. Deflation is the much more likely concern right now (as it has been for some time).