A group of leading monetarist economists urged President Reagan today to stick with his present economic policies but acknowledged that such policies will mean slow economic growth and a possible budget deficit for fiscal 1982 of well over $100 billion.
The group, known as the Shadow Open Market Committee, said the Federal Reserve, with the administration's backing, should continue to reduce the growth of the money supply and of government spending. Rather than the 5.1 percent economic expansion forecast by the administration for 1982, such a policy likely would mean zero to 1 percent growth and a rise in unemployment to between 8 percent and 9 percent..
However, this policy also should mean a drop in the inflation rate to between 5 percent and 6 percent next year, the committee said.
"There is a growing conflict between the policies pursued and the forecasts of their effects," the group said in a statement issued after its semiannual meeting here. "The problem is that presently no one knows which course the administration will follow . . .
"Years of failed promises have engendered skepticism about the durability of current policies. Skepticism is the principal reason that financial markets continue in disarray and interest rates, after adjustment for current inflation, remain at extraordinary levels. Decisive actions are required now to deal with the dilemma," the committee said.
The first such action for the administraion is "abandoning these mistaken forecasts," according to cochairman Allan H. Meltzer of Carnegie-Mellon University.
The committee said the economy already is in a mild but deepening recession that will last until next spring or summer. The administration's forecast assumes a resumption of strong economic growth by the end of the year, while most private forecasts fall somewhere in between.
Another member of the committee, Robert J. Genetski, chief economist of Harris Trust and Savings Bank of Chicago, said he expects real output to fall at about a 3 percent annual rate both this quarter and next and that "the economy would continue to be weak in the first half of next year."
Its specific monetary policy recommendations were that the Federal Reserve not seek to make up any current shortfall in money growth, which had been below the lower limit of its target range recently, and that a measure known as the monetary base rise by no more than 5 percent during 1982. The committee said this would mean about 4 percent growth for M1-B, which includes currency in circulation and checking deposits at financial institutions. Such growth would be exactly the middle of the 2 1/2 percent to 5 1/2 percent range the Federal Reserve has tentatively adopted for next year.
The Shadow Open Market Committee is so named because it was created several years ago in an attempt to persuade the Federal Reserve and its policy-setting Federal Open Market Committee to control inflation and influence economic activity by controlling growth of the money supply. Its members are afraid President Reagan may opt to try to make his economic growth forecast come true by encouraging the Fed to abandon its policy of monetary restraint, at a cost of higher inflation later.
The other cochairman, Karl Brunner of the University of Rochester, said this fear is shared in financial markets. He argued that interest rates are so high because investors in long-term bonds repeatedly have suffered large losses in recent years when inflation and interest rates have soared to new highs. Now such investors are demanding large "risk premiums" to guard against this happening again, Brunner said. Even so, there are few buyers for long-term bonds these days.
Much of the skepticism about administration policy continues because of doubts that it can come anywhere close to its announced intention of balancing the budget in 1984.