Expectations of a March rate hike have increased significantly over the last few days. Some market based measures now show an 80%+ chance of a rate hike.



A few excerpts from Merrill Lynch research:



The market has moved dramatically in the past two days to price in a hike at the March meeting. This was partly triggered by hawkish commentary from regional Fed presidents, including NY Fed President Dudley yesterday. While we agree that the chances of a hike in March have increased, given the Fed commentary, we are sticking with our baseline forecast for the Fed to stay on hold at the next meeting and hike in June. That said, it is a very close call ...

...

What to watch:

1. Fed speeches, with particular focus on Yellen and Fischer on Friday. Will they push back at all against market pricing for March? Or will they make comments similar to Dudley ...



2. Employment report on March 10th: While the Fed does not respond to just one report, they would like to see something trend-like to support a hike. This means close to 175K on NFP, a 0.2/0.3% mom rebound in wages and the unemployment rate slipping/holding steady.

The FOMC meeting will be on March 14th and 15th.