The Fed is playing with fire here. They have pressure on the one side from their current creditors not to lower interest rates under threat of a dollar sell off. On the other hand they are now facing a full fledged market panic and they know that they have to stop it before it starts to effect the real economy and consumers and businesses stop spending. Their choices are clear at this point.

Create more inflation by lowering interest rates and printing more money or let the economy go down the tubes in a debt implosion. They do not want this spilling over into the multi trillion dollar derivatives market.

The Fed believes that they can always get control of inflation if it gets out of hand. They know that there is nothing they can do to stop a deflation once it happens.

They will lower rates.