The Fed will hike rates until there are firing and layoffs

CNBC’s Jim Cramer argued Friday that the Federal Reserve‘s policies are severely outdated, and said the central bank won’t stop its rate-hike policy until Americans suffer from “firings and layoffs.”

“No one favors layoffs,” Cramer said on “Squawk on the Street.” “Want that? No. But their models say that’s when we’re out of the woods. … They are stuck with old models.”

The “Mad Money” host spoke shortly after December’s jobs report, which showed nonfarm payrolls surging by 312,000 last month, crushing estimates of 176,000. The Fed raised rates four times in 2018 in an effort to prevent the economy from overheating. The central bank projects just two rate hikes this year.

Cramer has been critical of the Fed ever since Chairman Jerome Powell’s remarks on Oct. 3 that the cost of borrowing money was a long way from so-called neutral, sparking concerns about possibly more aggressive Fed tightening. Powell appeared to walk back those comments the following month, saying rates are “just below” the balance point of not stimulating or slowing the economy.

Powell has left the door open to other options for this year, emphasizing “data dependency” and saying if data do not hold up in 2019, the Fed may change course.

In a CNBC interview before Friday’s jobs report, Cleveland Federal Reserve President Loretta Mester indicated the Fed could later reconsider its projections.

Mester was a voting member of the policymaking Federal Open Market Committee in 2018 but is not this year.

Not everyone on the Street expects the Fed to go through with two rate increases next year. A growing chorus of well-respected Wall Street voices, including Guggenheim’s Scott Minerd and Art Cashin of UBS, have predicted in recent weeks that the Fed could actually cut rates this year.

—CNBC’s Jeff Cox contributed to this report.

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