Reagan weighs reappointment of Volcker to Fed, with eye toward GOP chances in '84

The signpost on one side says ''inflation,'' on the other ''recession'' - and the chairman of the Federal Reserve Board is supposed to find a path between the two.

When Fed Chairman Paul A. Volcker took office nearly four years ago, inflation was running at more than 12 percent a year; now it is less than 4 percent. The price for this progress on inflation was a deep recession from which the economy is only now beginning to recover.

Should President Reagan reappoint Mr. Volcker - whom some call the second most powerful man in Washington - for four more years? He has only one vote in the 12-man board, but the unflappable chairman (who towers 6 feet, 7 inches) is generally regarded as leading the board.

The Constitution gives Congress power over money, regarded by many as the most politically sensitive instrument in Washington. But Congress has delegated much of its authority to the Fed. By raising or lowering the rate it charges on loans to member banks, the Fed in effect tightens or loosens credit. This control over the amount of money circulating in the economy has made the Fed the leading instrument of the nation's anti-inflation effort. The paradox is that by taking credit control ''out of politics,'' Congress has made the Fed one of the most potentially powerful political instruments in the city.

President Reagan's impending decision will come at a time when Volcker's actions on interest rates, some say, could decide the 1984 election. President Reagan hasn't said whether he will reappoint Volcker (originally picked by President Carter) and Volcker hasn't said that he wants reappointment. Alternatives to Volcker reportedly include Wall Street economist Alan Greenspan or Fed vice-chairman Preston Martin.

Most observers say Mr. Greenspan's policy on the Fed wouldn't differ sharply from Volcker's. Greenspan has long praised the present chairman. Furthermore, the chairman has only one vote and must win over supporters to switch its policy.

President Reagan has been reticent about Volcker and the Fed. Generally, he has gone along with its policy. The political background is that voters normally hold the President responsible for the economic situation. Although President Carter named Volcker, the latter helped tighten credit to check inflation after appointment. This produced a mini-recession that damaged Mr. Carter's reelection chances. Now encouraging economic news has increased Reagan's popularity rating, and the normal course of a business recovery could make Republican hopes brighter by November 1984.