* Traders expectations on rate hike in March doubled to 70 pct
* Wall Street's winning streak seen toughening Fed's rhetoric (Recasts throughout, add quote)
By Richard Leong
NEW YORK, March 1 (Reuters) - Traders on Wednesday piled on bets the Federal Reserve will raise interest rates in March even as analysts marked down their outlook on U.S. economic growth in the first quarter due to disappointing data on domestic consumer spending.
Interest rates markets have sold off since late Tuesday in reaction to hawkish rhetoric from a group of Fed officials who signaled an interest rate hike is forthcoming on signs of an improving labor market and inflation nearing its 2 percent goal.
Interest rates futures implied traders now saw 69 percent chance the U.S. central bank will raise rates by a quarter point at its March 14-15 meeting, up from 35 percent late on Tuesday, CME Group's FedWatch program showed.
"The odds of a March move have nearly doubled. That caused market participants to have a double-take," said Bill Northey, chief investment officer for the private client group at U.S. Bank in Helena, Montana.
Futures also suggested traders expected more than a 50 percent chance the Fed will raise rates at least three times by year-end.
On Tuesday, New York Fed President William Dudley, among the most influential U.S. central bankers, told CNN the case for higher rates "has become a lot more compelling" since Donald Trump's presidential win and Republicans retaining control of Congress.
Dudley's view was echoed by Dallas Fed President Robert Kaplan, who repeated his stance that the Fed should raise rates sooner rather than later.
The surge in rate-hike expectations coincided with mixed data released on Wednesday which caused several Wall Street firms to downgrade their estimates on gross domestic product in the first quarter to below 2 percent.
Consumer spending grew at a weaker-than-expected 0.2 percent in January, the Commerce Department said.
On the other hand, the Fed said in its latest Beige Book that the economy was expanding at a modest-to-moderate pace, with the job market remaining tight.
Against a moderate economic backdrop, the Fed's shift toward a faster pace of rate increases likely stemmed from record run on Wall Street and sizable gains in other risky assets following Trump's victory last November, said John Bellows, portfolio manager at Western Asset Management Co in Pasadena, California.
"The data have more or less come in as expected, but it's been the loosening of financial conditions," Bellows said.
Even if stocks and other risky assets retreat a bit from their lofty levels, they would not deter further rate increases, he said. (Reporting by Richard Leong; Editing by Jonathan Oatis)