Jim Kramer warns that inflation won’t drop anytime soon if Tuesday’s rally continues

CNBC’s Jim Kramer said Tuesday’s market gains need to be eased so that the Fed can beat inflation as soon as possible.

“For now, the best outcome would be for averages to drop quickly, so [Fed Chair Jay Powell] can be bypassed.

“Powell would have been better off not continuing this run, or else beach house prices, new construction jobs, linar Homes, manufactured food stocks and oil prices are not going to fall and will remain low anytime soon,” referring to the homebuilder’s warning in its latest earnings call that buyers have pulled back from current home prices as sales slow in some markets.

Stocks rose on Tuesday After the market closed on Monday due to the June holiday. While the rally was a welcome reprieve for investors after last week’s dips, many fear the comeback won’t last long as recession fears loom on Wall Street.

Cramer said that while he is usually in favor of higher stock prices, the Fed needs a market pullback for inflation to fall as well. The reason, he said, is that a downturn in the market will reduce spending and keep people in the job market.

“In recent years, bumper stock market gains have allowed winners to spend like crazy,” he said.

“If Powell can get this market down and stay put, canceling out a lot of those gains, then the wealthy are less likely to spend aggressively, and a lot of people are more likely to remain in the workforce when they are otherwise retired,” he added.