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Appaloosa Management's David Tepper said investors should believe the Federal Reserve when it says it will lower interest rates because the central bank has now to keep credibility.

"You just read what these guys are saying," Tepper said Thursday on CNBC's "Squawk Box." "Powell told you something. ... He told you some kind of recalibration. He has to follow through somewhat. I'm not that smart. I just read what they say and do they have conviction. They usually do what they say, especially when they have this level of conviction."

The Fed last week sliced half a percentage point off benchmark rates, starting its first easing campaign in four years with an aggressive move despite a pretty stable economy. In addition to this reduction, the central bank indicated through its "dot plot" the equivalent of 50 more basis points of cuts by the end of the year.

Fed Chairman Jerome Powell said the cut was a "recalibration" for the central bank and did not commit to similar moves at each upcoming meeting.

"Probably two or three interest rates, 25 basis point cuts, they have to do, or they lose credibility," Tepper said. "They're going to do something besides the 50. You know, another 25, 25, 25 seems like it's going to have to be done." (1 basis point equals 0.01%)

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