UPDATE 1-Fed's Bullard calls for big hike in interest rates to fight inflation

(Adds market reaction, context)

By Ann Saphir

Feb 10 (Reuters) - St. Louis Federal Reserve President James Bullard said on Thursday that he has become "dramatically" more hawkish in light of the hottest inflation reading in nearly 40 years, and he now wants a full percentage point of interest rate hikes over the next three U.S. central bank policy meetings.

Within minutes, Bullard's view became the market's view, with rate futures contracts now fully pricing an increase in the Fed's target range for its policy rate to 1%-1.25% by the end of its policy meeting in June, with some bets on an even steeper rate hike path.

"I'd like to see 100 basis points in the bag by July 1," Bullard told Bloomberg News in an interview, after a U.S. government report showed inflation rose 7.5% in the 12 months through January.

With only three Fed meetings between now and July 1, Bullard's comments point to at least one half-percentage-point rate hike, a big move the Fed hasn't made in any recent rate-hiking cycle.

Contracts traded at CME Group are now fully pricing in a half-percentage-point interest rate increase in March - up from about a 25% chance of such a hike on Wednesday.

Before Thursday, most economists and analysts had expected the Fed to move only in regular quarter-percentage-point increments. (Reporting by Ann Saphir Editing by Paul Simao)