POPULISM IS BACK in fashion, and a lawsuit pressing a longstanding populist grievance against the Federal Reserve System is now approaching a decision. The plaintiff is Sen. John Melcher (D-Mont.), a spokesman for farmers' and ranchers' engrained suspicion of the banks -- one of the enduring themes of American political history. He's probably wrong as a matter of constitutional law. But he has a reasonable point in principle.

The immediate issue is the Federal Open Market Committee, the immensely influential body that guides this country's monetary policy. That means interest rates. The committee is composed of 12 people. Seven are the members of the Federal Reserve Board, all of them appointed by the president and confirmed by the Senate; Sen. Melcher has no quarrel with that. The other five are presidents of regional Federal Reserve banks. The regional banks are not federal agencies, and their presidents are not legally public officials. Each is elected by the directors of his bank, and two-thirds of the directors of each Federal Reserve bank are elected by the commercial banks in its region.

Should people who are selected -- even very indirectly -- by the banks have votes in setting the country's monetary policy? It's not a new question. This litigation began a decade ago. Last month Judge Harold H. Greene held -- crucial point -- that the senator had standing to sue. The Justice Department asked the Court of Appeals to intervene on grounds that the case could have an unsettling effect on the financial markets -- which is certainly true. But the Court of Appeals declined, the case has gone to a hearing, and now Judge Greene is at work on his decision.

Sen. Melcher probably won't win. Monetary policy in this country has always involved a complicated overlapping of public and private institutions, and Congress specifically debated this issue when it set up the committee half a century ago. But if he should win, there would be a heavy impact on the internal politics of the Federal Reserve.

The chairman, Paul Volcker, does not have a reliable majority in the Federal Reserve Board. President Reagan's four appointees are all more willing than he to run inflationary risks to get interest rates lower. But he has strong support among the regional banks' presidents. If the court removes them from the committee, the effect will be to weaken Mr. Volcker. After some initial uncertainty, incidentally, the Justice Department to its credit is defending the Federal Reserve in this case.

The place to resolve Sen. Melcher's point is in Congress, not in the courts. The Open Market Committee is a strange institution. It probably ought to be rebuilt, but the job needs to be done with care. That's what Congress is for.