Jim Cramer says to focus more on earnings than inflation data with Fed in a cutting cycle

CNBC's Jim Cramer said investors shouldn't worry too much about the latest consumer price index data because the Federal Reserve has already started its cutting cycle.
Instead, he recommended paying attention to companies' quarterly report as earnings season begins.
"At the end of the day, the earnings are what control stock prices long-term, and stocks are what we're trying to make money on," he said.

CNBC's Jim Cramer on Thursday told investors not to fixate on the consumer price index report because it's become less important since the Federal Reserve embarked on a rate-cutting cycle. Instead, he said it's more worthwhile to follow data about individual companies from the upcoming earnings season, which kicks off Friday.

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"Forget the macro, people — it's not that meaningful when the Fed's cutting rates — and keep your eyes on the prize: Earnings," he said. "At the end of the day, the earnings are what control stock prices long term, and stocks are what we're trying to make money on."

The CPI — which broadly measures the cost of goods and services across the U.S. — rose by 0.2% in September, sending the annual inflation rate to 2.4%. This increase came in slightly higher than consensus estimates, and the major indexes dipped as investors worried about stubborn inflation. However, the inflation rate still fell from August and hit its lowest reading since February 2021.

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The Fed relies heavily on metrics like the CPI to make decisions about whether to cut, hold, or hike interest rates. After four years of hikes or holding rates steady, the central bank slashed them by a whopping 50 basis points in September, marking an aggressive start to the cutting cycle. According to Cramer, whether the Fed cuts rates or not at its next meeting, the general direction of interest rates is trending down. It would take a huge hike in the CPI reading to change the Fed's stance, he said, and Thursday's figures were not extreme.

But that's not to say that all economic metrics from the government don't hold weight, he added, highlighting the monthly labor report. He also explained that the CPI is always important to hedge fund managers "whipping around the bond market," which can make small moves due to macro numbers.

"We had to be concerned about this stuff when the Fed was on the warpath, either raising rates or leaving them higher for longer," Cramer said. "Now, though, the Fed is your friend, so I wouldn't obsess about the details, aside from the monthly labor report, which is still genuinely important."