Markets are increasingly open to the United States lifting interest rates this month after two Federal Reserve officials argued there was a strong case for rates to be higher.

The probability attached to a March rate hike rose to 52 per cent on Wednesday, up from 34 per cent a week earlier. That coincides with a 12-day record-breaking streak by the Dow Jones Industrial Average and ahead of US President Donald Trump's speech to a joint session of Congress.

John Williams, president of the San Francisco Fed, said the economy risked running "too hot" because monetary policy is still running "pedal to the metal", in the text of a speech delivered in California. "I am confident that the economy will continue to grow at a healthy pace even as we raise rates," Mr Williams said.

That was followed by comments from James Bullard, president of the St Louis Fed, advocating for the Fed to start shrinking its balance sheet which holds $US4.5 trillion of US debt it purchased through money printing. That factor meant that even as short-term rates rise, the weight of the Fed's holdings is keeping long-term rates from appreciating appropriately. Mr Bullard said there was no good reason to keep the balance sheet as big as it is.

"If that's the case, they stop reinvesting the coupons and maturities into the long end of the yield curve which would place some upward pressure on long bond yields in the US," said Richard Grace, chief currency and rates strategist at Commonwealth Bank. "Because they're no longer there buying and therefore easing rates at the long end."

Mr Bullard said the Fed has achieved its dual mandate – jobs and price stability – which ordinarily strengthens the case for higher rates, but it was the St Louis Fed's belief that "the low-safe-real-rate regime is unlikely to change in the near term" and that "a relatively low policy rate will remain appropriate".

The Fed has flagged three interest rate rises for 2017, having left rates unchanged at its first meeting for the year. The March meeting takes place March 14-15. The minutes of the January 31-February 1 meeting showed the central bank is confident that hike will come "fairly soon".

Mr Grace said he would not be "terribly surprised" if the Fed hikes this month. "The market's pricing it pretty accurately," he said, noting expectations were at 28 per cent at the start of the year.

"I think that's quite fair, the US data continues to surprise to the upside and the pricing for a Fed rate hike at the March meeting has lifted."

Earlier on Tuesday in the US, Bill Dudley, president of the New York Fed, told CNN that the case for raising has become "a lot more compelling" since the election because confidence is higher and the expected fiscal policy pay-off.