Mad Money

Cramer says to give Fed Chair Powell 'the benefit of the doubt' on inflation

Key Points
  • CNBC's Jim Cramer voiced support for Federal Reserve Chair Jerome Powell's patient approach to monetary policy.
  • Critics think Powell should act to control inflation, but Cramer said the central bank chief is right to keep policy easy for now as the delta variant spreads.
VIDEO4:5804:58
Southwest's delta variant warning shows Fed right to be patient on inflation, Cramer says

CNBC's Jim Cramer on Wednesday voiced support for Federal Reserve Chair Jerome Powell's patient approach to monetary policy.

Critics think Powell should act to control inflation, but the "Mad Money" host said the central bank chief is right to keep policy easy for now.

"I say give Jay Powell the benefit of the doubt. He's been right as rain since the pandemic started. His critics have been dead wrong for ages," Cramer said.

Cramer pointed to rising Covid cases across the country as the highly transmissible delta variant spreads.

"Powell's been adamant that we need to wait and see what happens with the delta variant before he starts raising rates or even tapering," Cramer said.

Earlier Wednesday, Southwest Airlines warned the delta variant is hurting bookings and lowered its revenue and profit forecast. "Southwest's preannouncement is a jarring reminder that much of the turn in our economy has to do with going out, has to do with traveling. Ticket prices have to come down if the new outbreak has more people staying home," Cramer said.

The "Mad Money" host also looked to the latest consumer price index for signs that rising prices could be transitory.

Core inflation, which excludes energy and food, rose by 0.3% last month, shy of economists' 0.4% increase and well below June's rise of 0.9%. The consumer price index report also showed used car inflation slowed in July.

"We don't know if there's less demand or more supply coming from the automakers of new cars. Either way, used car prices are a tremendous barometer for the future of the auto industry, and right now they say things are calming down," Cramer said.

Cramer also thinks it would be a mistake for the central bank to raise rates as the labor market recovers and businesses get back to normal. Companies including Wendy's and Uber said job applications are rebounding in states where unemployment benefits have been suspended.

"Can you imagine the economic catastrophe if the Fed were to hit the brakes on the economy right when those benefits drop off everywhere at the end of the summer and millions of people rush back into the labor force? That could get very ugly," Cramer said.

VIDEO9:1509:15
Jim Cramer says the Fed's inflation outlook still deserves the benefit of doubt

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com