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Jim Cramer says the Fed needs to slow down before making a rash decision

Commodity prices are plummeting in sync with a recession, says Jim Cramer
Commodity prices are plummeting in sync with a recession, says Jim Cramer

CNBC's Jim Cramer told investors on Wednesday that the Federal Reserve needs to calm down before it makes a rash decision about rate hikes that could make the market even worse.

With two weeks to go before its next meeting, Cramer stressed the need for prudence, not recklessness, in times of market confusion.

"There are plenty of Fed heads who believe they need to keep raising interest rates, rather than take their time to assess the situation," Cramer said. "They don't want to wait, they simply want to tip us into a definitive recession. I think their view is reckless simply because we're in an incredibly strange situation and we don't have all the facts. Maybe the Fed needs to tighten more, but would it kill them to wait another month or two?"

Cramer noted that from a surface-level view, the economy may seem great: Housing prices are booming, there are more jobs than there are workers, and the travel and leisure sector is so robust that American Airlines raised its forecast Wednesday morning.

However, these facts are misleading, Cramer said. With the exception of a few big winners, most industries are suffering.

"Everything else has gotten soft — everything — to the point where maybe the strength in housing and wages should be tempered by the data from everything else," Cramer said.

"I'm not saying the inflation hawks are wrong. I just hope they'd agree with Philly Fed President Patrick Harker today, who admitted that the economy's resilient, but maybe they should skip in-meeting hikes, in other words, maybe not do the next hike in June, just try to resolve the boom/bust paradox first."

Cramer stressed that many industry giants are sending out warning signs that the central bank should not ignore, especially brick-and-mortar retailers, which are seeing "discouraging earnings and almost uniformly tepid forecasts." CEO of grocery chain Costco — which Cramer dubbed "the arbiter of tens of millions of Americans" — said last week that food inflation is slowly starting to abate.

He also stressed that the Fed's rate hikes so far haven't even helped bring down mortgages, and rolling layoffs seem to be plaguing most industries. Even tech and finance are seeing mass layoffs, including ones not as highly publicized as Meta, Cramer added.

"Is it really worth it to raise interest rates in order to cool down housing, when recent rate hikes haven't done a thing to make mortgages more expensive? Does it really make sense for the Fed to spur on more layoffs when the layoff wave's already growing?" he said. "We don't know whether or not the Fed's winning. So why not wait? Beats the heck out of me."

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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Costco.

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