The Federal Open Market Committee had kept the rates on hold during its January meeting. However, the U.S. Fed is expected to hike the fed funds rate by 25 basis points during its meeting on Wednesday, noted Wells Fargo in a research report. Inflation has gathered momentum in recent months, with core inflation running at a 3.1 percent three-month annualized rate in February.

The average hourly earnings growth also stayed strong in February following a solid 2.8 percent year-on-year in January, and the labor market continues to tighten. Given higher inflation, rising inflation expectations and a strong employment outlook, four rate hikes are expected this year, said Wells Fargo.