Federal Reserve officials are in no rush to raise interest rates before their scheduled policy meeting next month, nor is a half percentage-point move in March yet likely, despite a bigger-than-expected jump in consumer prices that stoked speculation about such options.

An emergency increase risks signaling panic and cementing criticism that the central bank is too far behind in reining in inflation, while Chair Jerome Powell only last month predicted the pace of price increases would cool later this year. Powell also has shown a preference for building consensus within the policy-setting committee, and no Fed officials are now signaling a race to act before its March 15-16 gathering.

A rate increase before March would also involve bringing forward the conclusion of the Fed's asset-purchase program, enhancing the potential shock to an unprepared public. The Fed instead favors taking in further data before it makes a decision next month.

Speculation about a rare inter-meeting Fed move rose in markets Thursday after consumer inflation accelerated to a fresh 40-year high of 7.5% in January, with the annual core rate, excluding food and energy, running at 6%, also the fastest since 1982.

Money markets suggest about even odds on the possibility of a 50 basis-point increase in March, and St. Louis Fed President James Bullard, who votes on rates this year, said in an interview Thursday that he favors three hikes by July, with one of them being a half-point move.

However, centrists among the top Fed officials appear skeptical of a half-point hike, and are suggesting there is little need to start a hiking cycle with an aggressive move.

San Francisco Fed President Mary Daly said Thursday that a half-point rate hike "is not my preference," speaking to Market News. She cited the lingering drag of the pandemic and the fact that the Fed is already sending a clear message on its readiness to act. "Markets have already priced in the withdrawal of accommodation, and that is them hearing what the Fed is clearly communicating."

Thomas Barkin, president of the Richmond Fed, had a similar view.

"I'm open to it conceptually," he said of a half-point move, speaking Thursday at a virtual event hosted by the Stanford Institute for Economic Policy Research. "Do I think there's a screaming need to do it right now? I'd have to be convinced of that."

Powell is aiming for a rare soft landing, predicting that goods-price inflation will ease as supply blockages unclog. He and his colleagues will need to face down twin risks: averting a self-inflicted recession by hiking too fast, while moving quickly enough to keep public expectations about future prices in check.

The January data offered some evidence of broadening price pressures, with an acceleration in costs for services, unrelated to supply-chain issues. However, a month of data isn't likely to push officials to an inter-meeting hike.

Fed officials appear confident that they have the tools to lower inflation and that markets fully understand their intent to start tightening monetary conditions. When the rate-setting Federal Open Market Committee next meets, officials will have a full month more of data to look at before they make a decision, while geopolitical risks in Europe have also raised uncertainty.

Investors have boosted bets on the pace of rate hikes since the Fed's January meeting, shifting toward seven moves this year versus the three that officials forecast in December. Goldman Sachs Group Inc. economists said late Thursday that they now expect the central bank to hike seven times this year. Those at Citigroup Inc., Deutsche Bank AG and HSBC Holdings Plc now see a half-point shift in March, joining Nomura Holdings Inc. in that call.

Fed officials aren't pushing back against market expectations and are instead revising their own outlook for rates higher since their last forecast in December.

The report "shows continued inflationary pressure in the U.S." and "is concerning for me and for the Fed," Bullard said in the interview with Bloomberg News. "We are going to have to be far more nimble and far more reactive to data."

Bullard called a half-point move in March "a sensible response to a surprise inflationary shock that we got during 2021 that we did not expect," but highlighted that he would defer to Powell.

Bullard said the Fed isn't "in that mode" of emergency rate hikes, noting that there is little need to surprise markets now given the tightening they are pricing in already.

Craig Torres reports for Bloomberg News.

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