Federal Reserve Chairman Jerome Powell made the right choice in leaving interest rates unchanged and preaching patience — and it shouldn't be seen as him "caving" to Wall Street, says CNBC's Jim Cramer.
"Don't listen to the Fed watchers who claim that Powell caved to the stock market or the president," Cramer said Wednesday after the Fed's decision-making body concluded its two-day meeting. "The only thing Powell caved to is reality."
"Some would argue that Powell made a mistake, that he's simply capitulating to people like me who want higher stock prices. I hate this talk," the "Mad Money" host continued. "Sure, I love higher stock prices, ... but that's not the point and it has never been the point. [...] This is about the economy — who doesn't want a healthy economy? If Powell had stuck to his plan for a series of lockstep rate hikes, it would've been a lot more devastation to Main Street than to Wall Street."
Cramer maintained his monthslong theory that the Fed's earlier stance — which included a plan to raise interest rates three times in 2019 — would have brought an end to the United States' economic expansion.
He cited scores of private talks with U.S. chief executives, most of whom agreed that the Fed chief should keep interest rate hikes on hold considering how big of an impact his initial plan already had on the economy.
"Most of these execs said that if Powell simply exercised some patience, he'd see that he's already slowed down the economy enough to prevent inflation from becoming a problem," Cramer said.
The "Mad Money" host went on to explain that, rather than simply bending to the will of market-watchers, Powell likely started to notice some genuinely concerning economic trends: slowing global growth, the strong U.S. dollar, the holiday-season weakness in retail, the trade war, mortgage-rate pressures on the housing sector, a downturn in economic "building blocks" like basic chemicals, the declines in the price of oil, the government shutdown and weakness in travel, leisure and autos.
"Against all of these negatives, you've got a very strong labor market," Cramer said, explaining that the lack of workers bolstered the argument for raising rates. "But when you see 200,000 people being hired every single month with relatively small increases in wages, especially versus the bosses, then maybe we've been underestimating the pool of workers that's available."
So, at the end of the day, "while it's terrific that stocks rallied" after the Fed chief's statements, "that's not why Powell chose patience," the longtime stock-picker said. "He didn't want to be the guy who ended the expansion. He didn't want to be the reason we went into a recession."
And, while prudence might be key at this point in the U.S. economic cycle, it's not like Powell can't change his mind if the facts change, Cramer said.
"I salute Chairman Powell for not wanting to hurt Main Street, for not wanting to throw people out of work needlessly, for not wanting to crush the economy," he said. "Now, part of prudence is recognizing that if the economy heats up, instead of slackening as it was, Powell can come right back and tighten. If that's what we need, that's what he'll do. But ... what matters to me is that Powell listened."