* Traders expectations on rate hike in March doubled to 70
* Wall Street's winning streak seen toughening Fed's
(Recasts throughout, add quote)
By Richard Leong
NEW YORK, March 1 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
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
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
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,
(Reporting by Richard Leong; Editing by Jonathan Oatis)