I do not know if this question makes any sense... but I'm wondering what is the least expensive but very accurate ammunition available in .223/5.56x45? Is it Federal 50gr JHP? or Federal XM193? Winchester USA FMJ?

I understand there are lots of nice match-grade ammo available, but they're also more expensive. I'm looking for something that I can use for target shooting at 100yd to 300yd just to practice... and get around 1 - 2 MOA.

You might try XM193 first, see how your rifle likes it.

That's not attainable?

What would be the tightest average grouping with inexpensive ammo?? 2 MOA? 3 MOA?

My Russian VEPR K in 7.62x39 will easily shoot 1.5 MOA to 3 MOA with non-Match grade ammo.

My son and I have had great results with Win 62 gr FMJ in our 20" 1x9's , myself out to 200 yds, him out to 300 yds at his range in PA. Only a bit more expensive than 55gr FMJ, maybe $4.50 for a box of 20 vs $4.00 for 55gr.  Another member expressed similar satisfaction with FAE 62gr. The Win 62 has a BC of .28 and we have never experienced any issues with it at all.

I have shot subMOA at 100 yds with this ammo with my 3-9x40 scope. Can't give you MOA readings at 200 to 300 yds, since neither my scope nor my 50+ yr old eyes are that good and my son shoots open irons, so we are usually happy just to get "military" accuracy at those distances.  However, as a relative measure, POI density has always been much better with the Win 62 than every other round we have tried in the non-match category of ammo at those distances.

Of course, YMMV.

If you can find some of the Spanish SS109 it has shown great potential for tight groups. Some have had extraction problems with carbines mostly but I have never had a problem in my 20" rifle. At $2.99 a box it was a great deal. Most surplus ammo should be able to hold 2MOA or tighter but then again most donn't have eyes to hold that with iron sights. Too many variables too say what will work for you but try a few boxs of various surplus to find what works for you. Then buy by the case.

Barnaul's the best of the Russian, IME. Slightly less than 1 MOA with a friend who's an accomplished competition shooter.