In the world of high finance and money markets, probably no one is better known or more highly respected than Paul A. Volcker, the 6-foot 7-inch, cigar-chomping chairman of the Federal Reserve Board.

Named to run the central bank by former president Jimmy Carter in August 1979, a time when the dollar as sinking, and the U.S. government was facing an internal crisis, Volcker initially was something of a hero. His gilt-edged reputation among businessmen and bankers helped restore a degree of confidence among money men, and lent a degree of respectability to a shaky Carter administration.

But no one likes high interest rates, and no one is more closely associated with the current peak rates than Volcker. "He may have been a hero when he came in," muses a top Reagan administration official, "but I doubt that he will be a hero when he goes out." His four-year term as chairman expires in August 1983, at which time Reagan could replace him, if he chooses, with a full-fledged monetarist one who believes in a rigid adherence to establishing a target for money-supply growth then sticking to it through hell and high water.

When he came in two years ago, Volcker set the Federal Reserve onto a quasi-monetarist path emphasizing money-supply targets rather than interest rates. The result has been the highest sustained level of interest rates n history. But the price has been a slowdown in the economy that threatens to be severe. So for the first time publicly, Treasury Secretary Donald Regan has called attention to the fact that Volcker's Fed is not allowing the basic money supply to grow as much as its own very tight target would allow.

If the Fed doesn't loosen up enough to meet that target, "you're going to have a very serious recescion," Regan said in a New York Times interview.

Some White House officials caution that "not too much" should be read into Regan's remarks. But Donald Regan doesn't shoot from the hip. The Reagan administration had a message for Volcker: Don't take a 180-degree turn toward monetary ease, but allow money supply to grow at the mid-point of the target. Obviously, Regan and Reagan don't want the Fed to press the monetary brakes so hard that the United States follows Margaret Thatcher down the tubes.

From the start, there has been no love lost between Volcker and the Reagan administration. After all, as one high Reagan administration official carefully reminds a reporter, Volcker is Carter appointee, and not a fully authenticated monetarist. In 1979, they point out, he succumbed to Carter's pressure to impose credit controls, a move that most observers, including Fed economists, now concede was a mistake.

Therefore, despite his very conservative credentials, Volcker is viewed with suspicion by the true believers in the Reaganite establishment. One of them, the monetarist undersecretary of the Treasury, Beryl Sprinkel, is such an open critic of Federal Reserve procedures and techniques that Volcker sought (and had) an audience with the resident to ask that Sprinkel be reined in.

For his part, Volcker, while in accord with the objectives of the administration's four-part economic recovery program, doesn't accept the pure monetarist theory that accords ther anti-inflation measures little or no importance. Volcker has the same reservations about the president's big tax cuts that European officials expressed at the Ottawa summit: the loss of federal revenue, boosting the federal deficit, puts all of the anti- inflation burden on the central bank, forcing it to keep a tight hold on the growth of money supply.

In recent weeks, disappointed that interest rates haven't fallen, the administration has come around to the view that the Fed is engaged in overkill. In the first six months of this year, the money supply has been allowed to grow only 2.2 percent, instead of the 3.5 percent established by the Fed as a goal. In the past two months, there has been no net growth, and the economy is slumping.

Congress, too, has been quick to react. Once deferential and respectful, Congressmen now snarl and snipe at the Fed and at Volcker personally. When Volcker announced a further tightening of policy July 21 in House testimony, Republican and Democratic Congressmen alike bitterly denounced him.

It is difficult to see just how this critical policy squabble will be settled. So many predictions on interest rates and the economy have proved to be so wrong. Things can change dramatically in two years. But is is just possible that Volcker himself will be a casualty of the high interest rates that have flowed from the tough policy he established.