An unyielding Arthur F. Burns, whose reappointment as chairman of the Federal Reserve Board next January remains in doubt, yesterday announced new restrictions on the growth of the money supply, a step that often leads to higher interest rates.

In what may have been his swan song before the Senate Banking Committee, Burns vigorously defended the Fed's recent actions pushing up short-term interest rates, a development that Carter advisers say has weakened the stock market and could chill the economic recovery.

Burns scoffed at this theory, attributing the stock market decline and anxiety in the business community, instead to "the multiplicity" of Carter economic initiatives. He said he was "deeply concerned" about reports that Carter is considering reducint the special tax break allowed for capital gains.

Burns flatly denied, in the course of a friendly examination by Sen. Harrison H. Schmitt (R-N.M.), that there had been any "confrontation" between himself and the Carter administration.

"That's the product of journalistic imagination," Burns said, "and I pay almost no attention to it." He added that since Carter "is a man of great experience," he hopes the President also paid no attention to such stories.

Burns' policies have been openly criticized by chairman of the Council of Economic Advisers, Charles L. Schultze, who says that a further increase in short-term interest rates, already up a full 2 per cent since early this year, could - if the process continues - weaken the economy next year.

Burns revealed yesterday that the policymaking Federal Open, Market Committee on Oct. 18 had retained a target of 4.0 to 6.5 per cent for growth in the base money supply, (cash and checking accounts) but had lowered by one-half point its targets for broader measures that include savings deposits at commercial banks and thrift institutions.

A "crucial consideration" in lowering these targets for money growth through September of 1978 is "to reaf-firm [the committee's] intent of gradually bringing down the growth of the monetary aggregates to rates compatible with reasonable price stability," Burns testified.

Since the money supply has expanded well over the level promised in the old targets, Burn's crities say that a real effort to hold growth within the new range will inevitably push interest rates sharply higher.

House Banking Committee Chairman Henry S. Reuss (D-Wis.) said in a statement later that if Burns actually carries out the announced new policy, "the economy would be thrown into anothe rrecession."

Although Burns did not directly mention reports that the administration is considering a new stimulus program for 1978 to counter a sagging economy, he warned against "conventional" actions to encourage recovery.

"Simply opening up the monetary faucets or spewing out funds from the Treasury does not seem a promising course in view of the widespread concerns that now exist - participarly in the business and financial community," Burns said.

Later, he told reporters that any tax cut plan in 1978 should place "emphasis" on tax cuts for business, "because that's where it's needed most." Such a reduction would mean that economic activity "will actually accelerate as 1978 unfolds," he said.

Burns acknowledged that there had been a divergence of views in recent months on how to grapple with the economy, a split that had even brought two dissents from the 12 members of the Open Market Committee.

But the "dominant" view at the Fed, he told the Senate Banking Committee, is that the recent economic pause is giving way to renewed expansion, although "judgements about the more distant future are much more tentative."

He predicted that real gross national product, or total economic output, would grow by 4.5 per cent, inflation would be around 6 to 6.5 per cent, and unemployment would remain "sticky" at around 6.5 per cent next year, unless new policies are adopted. These estimates are roughly the same as unofficial guesses within the Carter administration.

Burns and Chairman William Proxmire (D-Wis.) jockeyed inconclusively on whether short-term interest rates should or would increase beyong the present level. The bellwether federal funds rate (the rate at which member banks borrow from each other) is now 6.5 per cent.

Burns said the Fed had moved "prudently" to push short-term rates up that far, because without this, the expansion of the money supply "would have been very damaging, for it would have practically destroyed any remaining hope of achieving mastery over the inflationary forces that now move our society."

Proxmire conceded that the recent rise in rates had been necessary, but pressed Burns to say how high he was willing to let short-term rates go.

"If I spelled out what you want," Burns said, "I might be wrong, and I would release forces that would rock financial markets. I have a job that calls for taciturnity to dealing with interest rates."

When pressed further, Burns said: "I would like to see interest rates stay where they are, or even come down, but they may have to go up."

To which Proxmire responded as an overflow crowd in the hearing room crupted in laughter: "I keep nailing that custard pie to the wall."

In his comments, Burns also:

Reiterated his warning that the United States must avoid continued depreciation of the dollar. He labeled as meaningless Proxmire's description of recent exchange rate developments as an appreciation of other currencies, rather than dollar depreciation.

Said some kind of voluntary wage price restraint, often called "income policy," needs to be developed, and called on the federal government to lead the way by slashing in half the recent 7.05 per cent Civil Service pay raise as an example to the rest of the country.

Blamed part of the current problems, of the steel industry on "oversized" wage increase won by unions.

Charged that "Congress has been legislation inflation." He was especially critical of legislation raising that minimum wage, and bills boosting Social Security taxes.

Several exchange between Burns and Proxmire only thinly disguised the bitter feeling between the two men. Proxmire would up the session by saying "we may be singing Auld Lang Syne, and in a way I hope we are, but we'll certainly miss you."