Fed may sit tight for now, steadying the course for '84

At closed-door meetings yesterday and today, top Federal Reserve officials are mapping a monetary strategy for the early weeks of the new year. Analysts expect the resulting Fed policy will either be unchanged or will include only slightly tighter credit.

''There probably will be a slight tilting toward restraint, but it will be very subtle,'' says Robert Schwartz, a financial economist at Merrill Lynch, Pierce, Fenner & Smith. He does not expect more than a 0.25 percent rise in the federal-funds rate, the price banks charge each other for overnight use of money.

Others predict that the Federal Open Market Committee, the Fed's policy-setting panel, will keep monetary policy largely unchanged. ''I don't see them tightening further than they have at this point. I do expect them to maintain the same degree of retraint,'' says Harold C. Nathan, vice-president and chief financial economist at Wells Fargo Bank in San Francisco. He notes that in recent weeks the Fed seems to have tightened up on the banking system, and so far this quarter, M-1, a money-supply measure that includes currency in circulation and checking accounts, has grown less than 2 percent.

For the consumer, the current monetary policy outlook means that ''if you are going to buy a house and have found a reasonable interest rate, don't wait for lower rates,'' says Bernard M. Markstein III, senior financial economist at Chase Econometrics, a forecasting firm. On the other hand, a sharp, short-term run-up in interest rates is not expected.

The small interest-rate increase some analysts expect also will hit individuals by dampening sales - and thus employment opportunities - in especially interest-sensitive industries like housing and autos.

Drastic monetary policy changes are unlikely ''because the Fed is going into an election year and does not want a policy causing an inflationary surge or a recession,'' notes Paul W. Boltz, vice-president and financial economist at T. Rowe Price Associates Inc.

A sharp increase in interest rates also could add to the international debt crisis by making it more difficult for debtor nations to cover the interest cost on their debts.

Applying modest additional restraint now or maintaining existing firmness would give the Fed the option of having either a steady or slightly easier monetary policy coming into the election year.

''In the back of policymakers' minds is a concern with being as neutral as possible in 1984,'' Mr. Nathan notes.

The Fed's job has been complicated by the inability of Congress and President Reagan to come up with a way to trim the huge federal budget deficits projected for the current and coming fiscal years. The federal spending that causes the deficits threatens to overheat the economy. So the Fed has less freedom than it would otherwise to relax monetary policy.

''If they did follow a looser monetary policy, it would mean lower interest rates - but it also suggests a speeding up of the economy which could ultimately lead to more inflation,'' Mr. Markstein explains. Most analysts think the Fed has been trying to cool the recovery slightly in an effort to prolong its length. In general, economists say, the more moderate a recovery's pace, the longer it lasts.

''One thing we need now is some additional moderation in (economic) growth'' in order to extend the recovery, says Robert Gough, senior vice-president at the forecasting firm Data Resources Inc.

There is some debate within the Fed over whether the degree of restraint has been too great. Last Friday's report on M-1 showed it rose a strong $5.5 billion in the week ending Dec. 7, to $522.7 billion, within the $519 billion to 5 to 9 percent.

Monetarists inside and outside the Fed are concerned by the fact that M-1 has grown only minimally since August, and the decline could cause a slowdown in economic activity in the second or third quarter of 1984. Those on the other side of the dispute say that for a variety of technical reasons, slower M-1 growth will not have a pronounced effect on the economy. Fed watchers do agree that the monetary authorities are placing less emphasis on money growth rates and instead are paying greater attention to interest rates as a means of achieving their economic targets.