CNBC's Jim Cramer on Tuesday chafed at the idea put forward by Treasury Secretary Janet Yellen that rising inflation could warrant higher interest rates.
"Right now though, even though I can totally see and feel the inflation from all sides, I'm sticking with Jay Powell as my quarterback," the "Mad Money" host said, referring to the Federal Reserve chairman. Cramer noted that Powell has insisted that a rate hike is unlikely until the labor market recovers from last year's downturn.
"For Yellen, I think it's reminiscent of her worst call at the Fed, when she decided to tighten in December 2015 after years of low rates," Cramer added. "She said she wanted to contain inflation; within six weeks the inflation had collapsed and she did some real damage to the economy."
The Treasury Department did not return CNBC's request for comment.
Yellen said earlier in the day that rates may have to rise "somewhat to make sure that our economy doesn't overheat." Those comments contributed to a volatile session on Wall Street.
The Dow Jones Industrial Average eked out a small gain, rebounding from a 347-point drop from earlier in the session. The S&P 500 and Nasdaq Composite ended Tuesday's session down 0.7% and 1.9%, respectively.
Tuesday's moves and Yellen's remarks come as commodity prices — a leading indicator of inflation — are trending higher. U.S. oil prices, for example, are up more than 17% over the past three months and have jumped nearly 12% in the past month.
Rising commodity prices are bad news for most companies, but investors can tailor their portfolio to stocks that can benefit from the environment, Cramer said.
"I need you to recognize that we're in a forgiving market. Investors like to buy high-quality stocks that go down," he said. "There will be winners and losers. It's our job to try to pick the winners, just like buyers picked the industrials at the bottom of today's market."
Meanwhile, Cramer offered stock ideas that could benefit from increasing commodity costs. Those winners include the copper company Freeport-McMoRan and steelmakers Cleveland-Cliffs and Nucor. Cleveland-Cliffs shares shot up nearly 12% on Tuesday. All three stocks have rallied about 40% or more this year.
"They're doing the same thing they always do, but their selling prices keep going up," he said. "That gives them what's called operating leverage, where any uptick in revenue produces a gigantic increase in earnings."
Cramer also advised that stocks like Kroger and Albertsons could hurt if inflationary pressures keep up. He added that surging raw costs hit companies like DuPont hard.
Disclosure: Cramer's charitable trust owns shares of DuPont.
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Jim Cramer dismisses Treasury Secretary Yellen's inflation assessment - CNBC
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