Bloomberg News

First Miami’s James Klotz on Fed Rate Cut: U.S. Bonds Comment

By Darrell Preston
08/21/01 15:31

Boca Raton, Florida, August 21 (Bloomberg) — Comments by James
Klotz, president of, a municipal bond web site operated
by FMS Inc. in Boca Raton, Florida, on the Federal Open Market
Committee’s decision to cut the overnight bank lending rate a
quarter of a percentage point to 3.5 percent.

Klotz isn’t optimistic about the Federal Open Market Committee’s
decision, nor does he think it was enough.

“I don’t expect it to be effective,” said Klotz.

Klotz expects it to take at least 18 months for the rate cuts
that began in January to revive the economy.

“The top economists all expected an economic recovery four to
six months ago after the easing began,” he said.

“You can cut rates all you want and if people don’t loan money
or people don’t borrow money, it won’t stimulate the economy,” said
Klotz. “The stimulus isn’t going to be there if the demand for the
money isn’t there.”

He expects another quarter point cut in October, and said that
while more is needed, Federal Reserve Open Market Committee Chairman
Alan Greenspan must go slow in cutting rates.

“The only reason it wasn’t cut to 3 percent now was because if
it doesn’t work right away, the Fed will appear to be impotent,”
said Klotz.


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