Cramer sees a narrowing market ahead, following Fed’s rate hike pause

CNBC’s Jim Cramer debriefed investors on Wednesday about the Federal Reserve’s meeting, where it announced a pause in rate hikes for now, but implicated further hikes later this year.

After the Fed action, Cramer said he sees a narrowing market ahead with investors selling in a panic.

“Like I warned you the last couple of weeks, the ‘Johnnie-Come-Latelies’ heard something they didn’t like from the Fed, and they just skedaddled,” Cramer said. “They didn’t believe in what they owned, they had no conviction. They were only buying because they couldn’t take the pain of missing the rally. They can’t take the pain of the sell-off now, so they’re just selling everything.”

Cramer believes the central bank will continue raising rates until it “kill[s] inflation stone dead.” He likened the Fed’s mentality toward the economy to that of an airplane trying to land, but needing to burn off fuel so it doesn’t explode after touchdown. The Fed can’t land the plane until it beats inflation, so it’s giving the economy some time to get worse before it actually drops the hammer, according to Cramer.

“[Fed Chair Jerome] Powell and company are saying, ‘Hey, let’s circle around the airport, let’s burn off that excess fuel and then make a stab at it,'” Cramer said.

However, Cramer thinks it’s likely policymakers won’t need to tighten as much as they hinted at on Wednesday, as he said it’s possible inflation will actually lessen on its own through job losses and wage cuts — and rents may come down as new apartment buildings finish construction.

When will the pressure end? Cramer’s not sure, but he thinks the economy needs “some more burning” first.

“We need the greedy people to finish selling. We need those who just came in off the sidelines to go back to the sidelines,” Cramer said. “Then and only then will the market be ready to resume the advance. For now, we’re  just going to go narrow again, perhaps from lower levels, as we circle the wagons around the ‘Magnificent Seven’ tech stocks and a handful of others with great secular growth themes that brought us up here in the first place.”