SHORT-TERM interest rates began to fall right after the Fourth of July weekend, and since then they have dropped more than three percentage points. Later in July, the Federal Reserve Board assured Congress that it will allow the money supply to rise to the top of its target range. The implication is that interest rates can fall farther, perhaps quite a long way, without running into restraint by the Fed eral Reserve. The financial markets are now reacting to that prospect.

But it's important to remember that there's another, and less happy, side to this sudden change of the collective mind in Wall Street. Until this month, most people in the financial world had taken it for granted that, during the autumn, the American economy would begin to recover from the recession. That would mean more borrowing -- and soon the expansion of credit would collide with the tight limits that the Federal Reserve has set. The result would be, once again, rising interest rates. That's why the markets didn't react immediately to the decline in rates in July and earlier this month. The experts considered it a mere blip that, within a matter of a few months, would be reversed.

What has changed? Within the past couple of weeks, the consensus has shifted among the economists who advise the investment houses and banks. They no longer believe that there will be any significant recovery before the end of the year. In particular, they notice that the July cut in income taxes does not seem to be having any visible effect on business. A brief statement to that effect by the most prominent of those economists, Henry Kaufman of Salomon Brothers, set off the past two days' torrent of trading. If there is no real business recovery in the months ahead, there will be no collision with the Federal Reserve's limits, and interest rates will stay low.

That's terribly good news, if your business is burdened with debt and interest payments. But it's not terribly good if you are trying to build up a new business--or to find a job. That's not everybody's idea of unqualified optimism.

The basic inconsistency in the country's economic policy has not been resolved. It still lies there, ready to choke off any steady expansion of sales and jobs that might get started. It's the inconsistency between a budget policy that uses big deficits to push for high growth, and a monetary policy that pushes for lower inflation. Whenever a wave of growth begins, the two policies collide, and the result is another terrific surge in interest rates. That won't happen for some time in the future, most of the specialists now believe. But the only reason is that the prospect for any real economic growth now seems more remote than, until very recently, they had expected.