INFLATION is now trotting along at an annual rate of about 6 percent, triple last year's phenomenally low level. That's one reason for the recent rise in interest rates. The other is the increasing reluctance of foreign investors to keep sending their money here. That by no means adds up to a forecast for a recession. But it suggests a hotter and slower economy than seemed probable at the beginning of the year.

Higher interest is tightening the brake on business just as public policy's chief instrument of expansion, the federal budget deficit, is beginning to weaken. For the past five years the Reagan administration's deficits have pushed the country's -- and for the matter, the world's -- economy into steady growth. But this year the deficit is coming down sharply. If it stays on the present track it will be about $40 billion less than last year's record $221 billion. That's a drop of nearly 1 percent of GNP, quite large enough to have a marked effect on the growth rate.

The optimists had hoped that a declining budget deficit would be accompanied by declining interest rates. As the stimulus of deficit spending dropped, they (and we) argued, it would be offset by the greater stimulus of easier money. That was a reasonable strategy, gone wrong because the deficit reductions were too slow in getting started. The cuts taking effect now are the result of decisions that Congress made in late 1985. Unfortunately, the financial markets move much faster than budget policy. Now the deficit will have to be brought down in less congenial circumstances than those of 1985.

If the long surge of deficit-driven growth is now approaching an end, you might ask whether it is leaving the country's economy significantly stronger. What enduring benefits have all those debts bought? The original Reagan plan was supposed to generate a long acceleration in investment and a return to rapid and continuous rises in productivity. That, of course, has not happened. Business investment at first rose sharply in the recovery from the 1982 recession, but it's been flat for the past year and a half. Productivity has been rising smartly in manufacturing, but falling in the service industries. For the economy as a whole, it has changed little for several years. The important gains have been in the numbers of people employed. But the standard of living is not rising as the Reagan administration, and most other Americans, expected