Jim Cramer Says Don't Doubt Fed Chair Powell's Assurance Of No Rate Hike, 'He's Been Consistent The Whole Time'

BY Benzinga | ECONOMIC | 05/02/24 12:28 AM EDT

Jim Cramer, the host of CNBC’s “Mad Money,” has advised investors to trust Federal Reserve Chair Jerome Powell‘s recent statement that a rate hike is unlikely, despite ongoing inflation concerns.

What Happened: Cramer urged investors to take Powell’s word seriously when he indicated that a rate hike is not imminent, despite persistent inflation, reported CNBC.

He highlighted that Powell’s comments, made after the Federal Reserve’s two-day meeting, have temporarily eased Wall Street’s concerns.

However, Cramer warned that investor anxiety could resurface ahead of the upcoming employment data release, which could provide insights into the economy’s trajectory.

"There's only one person worth listening to in this entire universe when it comes to this stuff, and that happens to be the plain-speaking Fed chief himself, Jay Powell. He's been consistent the whole time," Cramer said. "He raised rates until he feared he could tip us into a recession, then he stopped raising rates and the economy got hot again. But then interest rates went higher on their own and now we've gotten some brown shoots that are helping to slow the economy."

Cramer emphasized Powell’s consistency in managing the economy, stating that the Fed chief has taken the possibility of a rate hike “off the table.” He also noted the Fed’s decision to slow the pace of bond sales as a “dovish sign.”

Despite Powell’s remarks, Cramer stressed that the employment data could still impact market sentiment. He also appreciated Powell’s assurance that there are no signs of stagflation in the economy, a concern that many have raised.

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Why It Matters: The Federal Reserve’s decision to keep the federal funds rate unchanged at 5.25% to 5.5% on Wednesday, as widely expected, reaffirmed its commitment to steering the economy towards sustainable growth and controlling inflation.

The Fed also noted a lack of further progress towards its 2% inflation objective in recent months.

This stance has been questioned by investors like Larry Summer, who have warned against potential rate cuts in the current economic climate.

Meanwhile, renowned economist Peter Schiff has criticized Powell’s dismissal of stagflation concerns, comparing it to previous Federal Reserve misstatements. Schiff expressed skepticism over Powell’s inability to recognize the signs of stagflation.

Despite the ongoing inflation concerns, the market has been experiencing significant volatility, with Bitcoin topping returns in all asset classes in April amid repeatedly disappointing inflation data.

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In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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