Analysis: Why the Fed Is Unlikely to Start Raising Rates With a Half-Point Increase

Market speculation around whether the Federal Reserve might raise interest rates by a half percentage point, instead of a quarter point, at its March meeting has picked up in recent weeks. Hedge-fund manager Bill Ackman called for such a “shock and awe” move recently, as did Henry Kaufman, the former chief economist at Salomon Brothers.

While the Fed isn’t likely to rule out a half-percentage-point increase as an instrument in its tool kit, the central bank is unlikely to begin any sequence of rate rises with such a move,…