When Leif Olsen met with a group of economists in Washington several days ago , he found it reminiscent of a similar meeting in the spring of 1977. Many of the economists then, as today, were saying inflation was moderate and under control.
But a year later, prices were rising rapidly, at a 10 percent annual rate as measured by the broadest price measure, the gross national product deflator - just as Mr. Olsen, the chief economist at Citibank, had forecast.
Olsen gives similar warning today. Inflation, he predicts, could reach a 7 percent annual rate by this winter.
That's much more pessimistic than the consensus of economists. A survey of 46 economic forecasters taken early this month by Blue Chip Economic Indicators of Sedona, Ariz., found that on average they were trimming their inflation forecasts.
In July, the same group forecast year-over-year 1984 inflation at 4.6 percent. Now they figure 4.4 percent. For 1985, they reckoned last month on an acceleration to 5.7 percent. Now they say only 5.3 percent.
Olsen finds himself exasperated with economists who refer to the modest inflation pace of today and assume this will continue. They, in effect, say, ''Inflation isn't accelerating until it is accelerating,'' he notes. ''That isn't a forecast. It is a current observation.''
Olsen notes that history shows that inflation can move sharply higher within a few months. He cites 1978 as the latest example. It also happened in 1974, even if the impact of the dramatic increases in food and energy prices is excluded.
Why is it that inflation can jump ahead so rapidly?
Olsen explains that when the economy starts to bump into its capacity ceilings, producers can raise prices more freely. Indeed, in a sense they must raise prices to ''clear the market.'' If they don't, they will face long backlogs of orders.
As many producers see it, they are merely ''catching up'' on prices, he said. Often they see their industry or position as unique. They don't necessarily regard their actions as inflationary.
Whatever the case, the economy is rapidly approaching that level of activity where boosting prices becomes easier.
For the last six quarters, the gross national product (the output of goods and services) has been growing on average at an 11 percent annual pace in nominal terms, about 7 percent in real terms (inflation has been running about 4 percent).
Imports have grown rapidly, taking care of about 1.5 percent of the extra demand, Olsen notes. But this still leaves real domestic growth running at a 5.5 percent rate, well above the 2 or 3 percent growth the economy can handle normally.
Industrial capacity utilization has risen from 69 percent in 1982 to 81.7 percent in June. Unemployment has dropped in the same time period from 11 percent to a little above 7 percent.
If growth were to continue at the pace of the last year and a half, by next spring some 90 percent of industrial capacity would be utilized, Olsen calculates. Unemployment would drop to 5 percent.
If that didn't kick off more inflation, he says, ''certainly something strange and unusual has happened to the economy.'' Inflation in the last couple of decades has usually started picking up when industrial capacity utilization ran around 85 or 86 percent.
In the 1950s, inflation waited until industry was using about 91 percent of capacity. But Olsen has seen ''no good arguments'' to convince him that is true today.
The Citibank economist does not regard sharply accelerated inflation as ''predestined,'' however. His chief hope is that the Federal Reserve System will restrain monetary growth sufficiently to slow gross national product growth in current dollars to 8 or 9 percent for the next six or so quarters.
''Then it is possible inflation will not be so high,'' he says.
The Fed has managed to stop the rapid growth of money in the last two months, with no growth at all in July. If that pattern were to continue to Christmas, Olsen cautions, the economy would soon be plunged into a recession. But if it acted more moderately, growth would merely slow down.
''Whether or not inflation accelerates very much - that is in the hands of policymakers,'' he maintains.
Of course, some economists argue that inflation is already basically licked.
For example, Sam Nakagama of Nakagama & Wallace Inc., economic consultants, counts on inflation remaining below 4 percent over the next 18 months. (He, by the way, was also correctly pessimistic for inflation in 1977 and '78.)
Mr. Nakagama bases his optimism on nine factors: (1) monetary growth being effectively restrained; (2) a strong dollar as a result of slow money growth and huge budget deficits; (3) the strong dollar, putting downward pressure on the price of oil and other commodities; (4) import competition and business deregulation greatly reducing the power of unions to push up wages; (5) the prolonged double-dip recession, producing persistent high unemployment in the old industrial states; (6) the conjunction of low operating rates in the old industrial nations and the expansion of capacity in the newly industrializing countries, such as Brazil and Mexico, providing plenty of reserve capacity to supply imports to the United States; (7) the rapid spread of high technology, spurring productivity and keeping costs down; (8) unit labor costs in manufacturing trending downward; and (9) the shift of political power curbing welfare-type expenditures.
So Mr. Nakagama sees the economy in a ''virtuous cycle.''
Mr. Olsen would acknowledge many of the same factors (although he finds no evidence that commodity price trends forecast inflation). But if growth is too fast and capacity is getting tight, he still expects businesses to raise their prices - and thus inflation.
The nation will find out who is right in a few months.