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By Rishav Chatterjee

March 8 (Reuters) -Australian shares closed lower on Wednesday after U.S. Federal Reserve Chair Jerome Powell warned interest rates might need to go up faster and higher than expected to control high inflation.

The S&P/ASX 200 index .AXJO fell 0.8% to 7,307.8, with commodity stocks leading declines. The benchmark rose 0.5% on Tuesday.

The Fed will likely need to raise interest rates more than previously expected in response to recent strong data, Powell told U.S. lawmakers on Tuesday, sending equities tumbling across the globe.

Australian shares probably rallied too hard on Tuesday and have probably fallen too hard on Wednesday, but with another night of Powell's testimony, people are a bit nervous, said Henry Jennings, a senior Analyst and portfolio manager at Marcus Today.

Traders are now anticipating an almost 70% chance of a 50 basis-point rate hike in March, according to CME's FedWatch tool, up from about a 30% chance a day ago. FEDWATCH

Meanwhile, Reserve Bank of Australia Governor Philip Lowe said it was closer to pausing aggressive cycle of rate increases as policy was now in restrictive territory, and suggested a halt could come as soon as April.

Miners .AXMM fell 1.2%, withBHP Group BHP.AX, Rio Tinto RIO.AX and Fortescue Metals FMG.AX shedding between 0.1%and 1.4%.

Energy stocks .AXEJ dropped 4.2% after oil prices slumped overnight on fears of steeper U.S. rate hikes.

Woodside Energy WDS.AX dropped the most in three months on ex-dividend trading. The company said it was on track to make a final investment decision this year on the Trion offshore oil project.

Banks .AXFJ declined 0.7%, withall the "big four" banks closing in negative territory. Meanwhile, Commonwealth Bank Of Australia CBA.AX said its Indonesian unit had been hit by a cyber attack, involving unauthorised access of a software application. Its shares fell 0.3%.

Gold stocks .AXGD plunged 3.4%as bullion prices fell after Powell's hawkish tone. Northern Star Resources NST.AX and Newcrest Mining NCM.AX lost 2.8% and 3.4% respectively.

New Zealand's benchmark S&P/NZX 50 index .NZ50 fell 0.5% to 11,855.5.

Reporting by Rishav Chatterjee in Bengaluru; Editing by Subhranshu Sahu

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