To US allies, Volcker symbolizes fight against inflation

President Reagan, whose economic policies are controversial overseas, could take one step that would win universal applause from the heads of government who will meet with him at Williamsburg, Va., at the end of May.

He could reappoint Paul A. Volcker, whose term as chairman of the Federal Reserve Board expires Aug. 6, to another tour of duty as head of the US central bank.

That would help to convince uneasy financial markets here and abroad that consistency would govern US monetary policy during turbulent years that may lie ahead.

''Volcker,'' says Allan E. Gotlieb, Canadian ambassador to the United States, ''has become a symbol of US determination to fight inflation.''

''If he is not reappointed,'' said a European diplomat, ''the question will arise: Why? Does Reagan want his own man at the helm of the Fed to keep the recovery going?''

Both men spoke at an informal conference here of US, Canadian, European, and Japanese experts on global economic problems, sponsored by the University of South Carolina and the Washington office of the European Economic Community.

''Everyone,'' said a prominent US banker, ''looks down the road 18 months or two years when the Fed will face a critical choice. Either it will have to monetize the huge government budget deficit (that is, expand the money supply) or slam on the monetary brakes.''

Either course of action would tend to drive up interest rates and retard recovery, now under way in the US and just beginning in a few countries overseas. Expansion of the money supply would, in addition, threaten to rekindle inflation.

Experts gathered here see little prospect of Congress and the Reagan administration fashioning the kinds of budgets that would tame the deficits and ease the burden of choice on the Federal Reserve.

The President, meanwhile, indicates that he has not yet decided on the Fed appointment. ''We don't discuss the possible appointees that face us until the time comes,'' Mr. Reagan said Tuesday night during his press conference. ''When the time is right, why, we will get together on that subject and decide what our course is going to be.''

''The time for decision,'' commented an American banker, ''is long past. Uncertainty feeds on itself in the (financial) markets.''

Relations between Volcker and Reagan have not been close, although the President generally has supported the Fed chairman's tough stance against inflation, embodied in a tight money policy from late 1979 through mid-1982.

That policy did curb inflation, cutting the annual price rise to roughly a 3 percent level. But the Fed's policy also deepened the recession, contributed to major job loss, and helped to keep interest rates high.

Europeans and Japanese abhor high US interest rates, because their own rates climb in response. As in the US, so overseas, high interest rates discourage business expansion and have led to the highet unemployment since the Great Depression of the 1930s.

But most foreign leaders fear a resurgence of inflation even more. They tend to see in Mr. Volcker a bulwark against US policies that might launch a new round of inflation.

Politically, the end of Mr. Volcker's current term comes at an awkward time - little more than a year before the 1984 presidential election. The President counts on the good news of an upbeat economy to bolster either his own chances or those of another Republican nominee.

Volcker also wants a solid recovery, but not at the cost of inflation. He and other Fed governors insist that monetary screws will be appropriately tightened if prices start to take off again.

The longer the President delays his decision, the more the perception in the marketplace grows - whether rightly or wrongly - that he might seek out a Fed chairman more pliant to his wishes.

Interest rates, meanwhile, remain high in real terms, while lenders try to sort out what the future may bring.

Volcker's key role in putting together emergency financial packages for Mexico and other debtor lands is another reason why many foreign officials want him to remain on the international scene.

''Ten years ago,'' notes Robert D. Hormats, vice-president of Goldman, Sachs & Co. and a former high State Department official, ''Volcker was Treasury undersecretary for monetary affairs. He knows the world.''