Jim Cramer calls for ‘monster rate hikes’ ahead of key Fed decision

CNBC’s Jim Cramer on Tuesday called for Federal Reserve Chair Jerome Powell to implement aggressive interest rate hikes to tamp down inflation.

“Jay Powell can’t solve the war in Ukraine. He can’t get more oil out of the ground. … The same goes for the other big source of inflation, food,” the “Mad Money” host said.

“He has to hit us with some monster rate hikes to cool things down while selling, I hope, at least $200 billion in bonds a month — twice the current schedule — just to fix a problem not of his own making,” he added.

His comments come as the Fed began its June meeting to decide the size of the next interest rate hike, which will be announced on Wednesday. 

The Fed, which raised interest rates by 25 basis points in March and 50 basis points in May, will also start offloading some of its balance sheet on Wednesday in an effort to drain trillions of dollars of liquidity from the financial system.

Investors and central bank policymakers alike are bracing for a 75-basis-point rate hike on Wednesday. The market reacted accordingly as the S&P 500 slipped further into bear territory on Tuesday while the Nasdaq Composite and Dow Jones Industrial Average also remained volatile.

Inflation hit new highs in May as prices rose 8.6% from last year in the fastest increase in over four decades, also driving the market’s recent declines.

Cramer has advocated for 100-basis-point rate hikes in recent weeks, urging Powell to take stronger action even as he argued that the Fed chief is not to blame for the current state of inflation.

“In retrospect, the Fed provided way more liquidity than it needed to. It should’ve stopped buying bonds more than a year ago. …  But beyond selling trillions in bonds to rein in the economy and raising rates to cool down what can be cooled — which isn’t much — we’ve got to stop blaming Powell for all things inflation,” Cramer said.