Dow and S&P 500 updates: Stocks close sharply down after Powell says rates will rise more than expected

The Federal Reserve’s future policymaking actions will depend heavily on movement within three key inflationary sectors: Goods, housing and the broader services sector, Fed Chair Jerome Powell said Tuesday in response to a line of questioning from Republican Senator Katie Britt of Alabama.

In goods, the Fed needs the disinflation already underway to continue, he said.

In housing, the Fed needs time pass, he added, noting the lagging data will soon reflect new, less pricey leases being signed.

In services, “we’ll be watching that very carefully,” Powell said, adding the sector accounts for 56% of consumer spending. Powell previously noted in Tuesday’s testimony that services — which includes a variety of industries such has financial, medical, personal care, travel, and leisure — is a driving source of today’s inflation.

Powell also noted that the Fed’s efforts to date have likely yet to be fully felt.

“We raised rates very quickly last year, and we know that monetary tightening policy has delayed effects; it takes a while for the full effects to be seen,” he said.

Still, those monetary policy tools do have limitations, and this bout of inflation isn’t like those seen in the past, Powell cautioned.

“We have many unusual factors, and I don’t think anybody knows with confidence how this is going to play out,” he said.