UPDATE 1-Fed rate cuts may wait as inflation ticked up in December

(Adds inflation data in paragraph 2, analyst comment in paragraph 5)

Jan 11 (Reuters) -

Federal Reserve policymakers may not be quite as eager to start cutting interest rates as soon as March after fresh data showed inflation ticked up in December.

The consumer price index (CPI) rose 0.3% in December after increasing 0.1% in November, the Labor Department's Bureau of Labor Statistics said on Thursday. From a year earlier, consumer prices rose 3.4%, more than the 3.2% economists polled by Reuters had expected.

U.S. central bankers want more confirmation that inflation is on a firm path toward their 2% goal before they reduce the policy rate, now in the 5.25%-5.5% range.

Thursday's data fell short of delivering that, with shelter prices failing to cool as policymakers have long expected. Used car prices, air fares, and medical care services prices also rose.

"The upshot of today’s inflation report is that the inflation dragon, while maimed, has yet to be slain," said Jason Pride, chief of investment strategy and research at Glenmede.

Futures contracts that settle to the Fed's policy rate are still pricing in about a 65% chance of a Fed rate cut in March, down from about a 70% chance seen before the report, and see Fed taking the policy rate down below 4% by the end of the year.

Those bets are far more aggressive than Fed policymakers themselves signaled last month, when they penciled in a year-end policy rate of 4.6%.

(Reporting by Ann Saphir; Editing by Andrew Cawthorne and Chizu Nomiyama)