Federal Champion Target (standard velocity) is good stuff- if you want better than that, you are looking at very pricy match ammo (IMHO) and while the 881 is not a benchrest rifle, from a rest it should give you decent groups at 50 yards.
Couple of things to check- first, are all screws snug- including the scope screws? Have found a few that the action/barrel were loose in the stock. Second, with an UNLOADED rifle, carefully check the crown of the muzzle with a good light and a magnifier, looking for dings or damage. A slight boo-boo there will throw bullets way off. Finally, take 10 minutes and thoroughly clean the bore with a brush and solvent- it is not uncommon for 22s to "lead up" a bit from the very soft lead ammo.
I have the daddy to your rifle- a Model 81- that with a 4 power scope will pop clay pigeons at 100 meters, so the accuracy level you are seeking at 50 should be achievable. If the above does not tighten up your groups, then I am stumped- hopefully others may have some more ideas.