They only cut rates if they have too because they know that rate cuts = higher asset prices = more inflation.

Something breaks, they patch it up with lines of credit like the BTFP, Discount window, etc. if there’s enough contagion where those remedies don’t stoke the required confidence to stave off a deflationary spiral, they make money cheap and the well capitalized folks take on near-free debt to gobble up all the assets for cheap