US RATE FUTURES-Hint at 100 bps March Fed cut on Feb jobs

(Adds details, analyst comments, byline, updates prices)

By Ros Krasny

CHICAGO, March 7 (Reuters) - U.S. short-term interest rate futures were sharply higher on Friday, setting up for aggressive Federal Reserve rate cuts after an unexpected drop in U.S. February nonfarm payrolls.

A second straight decline in monthly job creation was taken by dealers as a definitive sign the U.S. economy is in or on the verge of recession.

"The market has moved liked gangbusters on this," said Rudy Narvas, analyst at 4CAST in New York.

Futures FFJ8 now fully reflect a 75 basis-point rate cut from the Federal Reserve this month, which would take the bank's benchmark lending rate to 2.25 percent, and a 24 percent chance for 100 basis points in cuts.

As recently as Wednesday futures were split evenly between a 50 basis point and a 75 basis point rate cut.

The Federal Open Market Committee will meet on March 18 to consider its next move on benchmark U.S. interest rates. The fed funds rate is currently 3 percent.

U.S. payrolls fell by 63,000 in February, the biggest slide since March 2003, against forecasts for a 25,000 increase, and followed a decline of 22,000 in January.