Federal Reserve Vice Chairman Preston Martin said yesterday that U.S. economic growth is still "sluggish" and warned that "there is some likelihood of a recession in 1986."

Martin's comments, made to reporters prior to a speech at Fairfield University in Connecticut, helped fuel expectations of some market analysts that the Fed might ease monetary policy soon.

The bond and stock markets extended a rally begun Tuesday after a highly successful auction of new U.S. Treasury securities and a speech by Federal Reserve Chairman Paul A. Volcker that some market participants also interpreted as suggesting an easier policy stance might be on the way.

However, other analysts said they found nothing in the Volcker speech to suggest a move toward ease. This group of Fed watchers believes the central bank's policymaking group, the Federal Open Market Committee, will make no change in the availability of reserves to financial institutions when it meets on Monday.

The last FOMC action disclosed publicly came at a meeting in late August at which the committee, responding to growth of the most closely watched measure of the money supply, M1, that was far above the Fed's target range, chose to increase slightly the pressure on bank reserves.

Some financial analysts expect the Fed to reduce its discount rate -- the interest rate paid by institutions that borrow reserves directly from the central bank -- from its current 7 1/2 percent level to 7 percent.

Asked about the possibility of such a cut, Martin, according to wire service reports, said that it would take a combination of continued sluggishness in the economy and "less rapid growth" in at least two of the three measures of the money supply to justify such a move. The three measures are providing "mixed signals" right now, he said.

The measures are M1, which includes currency in circulation and checking deposits at financial institutions; M2, which also includes savings and small time deposits, most money market mutual fund shares and some other items, and M3, which also includes large time deposits and some additional items.

Until very recently, M1 had been rising much faster than Fed policy makers had intended. Even with a very large $6.8 billion decline in the last reported week's level, the measure remained above the upper limit of its target range, and many analysts expect it to bounce back up again.

Martin, who has generally favored an easier policy stance in order to keep the economy growing at a healthy pace, said the very recent slower growth of M1 "gives us some action space."

However, he stressed both in the press conference and in his speech that the Fed is taking an "eclectic" approach in which policy is being based on several factors, including the overall state of the economy, the value of the dollar on foreign exchange markets and the prospects for inflation, as well as growth of the money supply.

"There is no magic that will solve the problems resulting from . . . imbalances caused by real economic factors. . . . That objective can best be achieved by continuing the eclectic approach to monetary policy that has characterized our actions since 1982," Martin said.