The president of Chase Manhattan Bank said today that the tight money policy adopted by the Federal Reserve Board to fight inflation "has not only failed to reduce inflation in our country -- but has, instead, exacerbated it."

Willard C. Butcher, who will succeed David Rockefeller as chairman of the nation's third-biggest bank next spring, said the Federal Reserve cannot effectively fight inflation without harming the economy unless other arms of the government give it some help.

In recent weeks, as the Fed has consistently tightened the monetary screws, interest rates have soared. On Nov. 1 the prime rate was 14 1/2 percent. Last Friday most major banks moved the rate to 19 percent, only a percentage point short of the record 20 percent level that prevailed briefly last spring.

Today, UMB Bank and Trust Co., the U.S. subsidiary of the United Mizrahi Bank of Israel, boosted its prime rate to 19 3/4 percent.

Although no major banks followed the foreign bank's lead today, most analysts expect the prime lending rate -- the interest banks charge their most-credit-worthy corporate customers for a short-term loan -- to climb to 20 percent within a matter of days.

Interest rates in the open market, where banks get much of the money they then lend to companies, continue to rise sharply. Rates on 90-day certificates of deposit, for example, are well over 18 percent and climbing.

Although Butcher was critical of the results of the Federal Reserve's tight money policy, he was not critical of the central bank itself. He said he favors a "firm" monetary policy, but said such a policy can work only if the government takes other steps to assist it.

"In my view, the Fed has been placed in an impossible box because of our refusal as a nation to commit the rest of our weaponry to fighting inflation," Butcher said in an address to the Union League Club here.

He said the nation must move to a "more blanced" inflation approach that includes:

Cutbacks in government spending and borrowing.

Evaluating the role of cost-of-living escalators in wage and benefit programs that institutionalize inflation.

Increasing productivity in the economy through the combined efforts of management and labor.

Changes in tax policy, the approach to profits and a step-up in research and development spending to increase incentives to invest.

A significant reduction in government regulation.