"At a certain point, he has to reassert the independence of the Fed and that he is not going to do what the president tells him to do," Cramer said on "Squawk on the Street." "He's got to defend the institution."
President Donald Trump on Sunday told reporters that the Dow Jones Industrial Average would be "5,000 to 10,000 points higher" if not for the Fed's restrictive policies. The benchmark was under pressure Monday after losing ground Friday. The Dow closed at a record high of 26,966 in Wednesday's shortened trading session before the Fourth of July holiday.
Trump has repeatedly criticized Powell for the Fed's decisions to raise interest rates four times last year and to maintain rates so far this year. Earlier in 2019, the White House was reportedly looking into demoting Powell.
On Friday, Trump tweeted the Fed is the "most difficult problem" the U.S. faces, saying it "raised rates too soon, too often, & tightened, while others did just the opposite."
"I think it's getting harder and harder for the Fed chief to ignore the criticism," the "Mad Money" host said. So far, Powell, who was appointed by Trump, has responded to the criticism by maintaining the central bank's independence and saying he intends to serve his four-year term. But that stance will only get him so far, as the rhetoric is getting "too intense," Cramer said.
Powell will testify before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday. At those those hearings, he's likely to be asked whether he'll lower interest rates on Trump's direction, Cramer predicted. "He can't just say 'I ignore the president,'" Cramer said, but needs to say it's not his job to "get the Dow higher."