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    Banks rallied on a Fed cut, and that's a 'very positive' sign, Jim Cramer says

    Bank stocks rallied after the Federal Reserve approved a quarter-point cut to interest rates, and that's a "very positive" sign, CNBC's Jim Cramer said Wednesday.
    The SPDR S&P Bank ETF (KBE) managed to climb 0.68% at session end, in response to the central bank's decision to reduce the benchmark lending rate to a target range of 1.75% to 2%. Among the largest banks by market cap, J.P. Morgan Chase and Citigroup were the biggest gainers, posting 1% and 0.88% increases, respectively.
    The market saw "people buying the bank stocks because there's a chance [Fed Chair Jerome] Powell's rate cuts may put an end to this artificially inverted yield curve, and at the same time he's committed to preventing the economy from slipping into a credit-ruining recession," the "Mad Money" host said. "Powell's not planning to slam his foot on the gas pedal. He's just gently tapping it to make sure the economy doesn't slow down too much, and that works for the banks."
    Cramer predicted the rate cut would carry the market for the rest of the week until investors return to playing the "guessing game." That's because members of the Federal Open Market Committee, the body that decides monetary policy, are divided on how the central bank should move forward the rest of the year.
    Seven of the dozen members want to see at least one more rate cut this year, while the remaining five want the rate to remain in place. Five members voted against a 25 basis point cut in Wednesday's meeting.
    The major indexes saw mixed trading, with the Dow Jones Industrial Average adding more than 36 points, the S&P 500 inching up 0.03% and the Nasdaq Composite slipping 0.11%.
    "The U.S. economy does [have] a lot of strength ... The rest of the world does have a lot of weakness. So we got what pundits were calling a 'hawkish cut' ... meaning it's the last rate cut, or maybe the penultimate rate cut," Cramer explained. "Apparently, that wasn't enough for some money managers."
    Powell is signaling that he doesn't want the economy to slow down too much, which works for the banks, the host said.
    "The Federal Reserve just gave us a soporific quarter-point rate cut, an automaton-like 25 basis point slice, a predictable two-bit haircut," he said. "You're not going to get more than that from Jay Powell, unless something has gone seriously wrong with the economy."

    WATCH: Cramer reviews Wall Street's reaction to the Fed rate cut

    Disclosure: Cramer's charitable trust owns shares of J.P. Morgan Chase and Citigroup.
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