After months of spiraling downward, interest rates started back up again last week. But most Wall Street economists don't expect them to stay up. Rather, over the next three to six months, the consensus is for rates to continue to fall.
One of the chief reasons rates started to rise again last week was anticipation of the government's financing requirements. For the next few weeks, points out Donald Maude, chairman of Merrill Lynch's interest rate committee, the government's slate of financing is substantial. And, as Frank Mastrapasqua, chief economist at Smith Barney, Harris Upham & Co., notes, ''Typically, the announcement of a Treasury financing has been associated with weakness in the fixed-income markets, while the financing itself has set the stage for an improving market.''
At the same time, investors have been concerned about the growth of the money supply. In a speech Thursday, Paul Volcker, chairman of the Federal Reserve Board,
that the Fed would exert
''continuing restraint on the growth of money and credit.'' In recent months, however, notes Mitchell Held, a vice-president at Smith Barney, the money supply has been growing well above the Fed's target levels. According to the brokerage house, M-1, which is one measure of the money supply, grew 14.5 percent from the fourth quarter of 1982 to February. This exceeded the target range by 4 to 8 percent. ''This is making the markets a little nervous,'' Mr. Held says. But he adds that ''a lot of the rise is due to technical factors.''
The Fed, in fact, acknowledges that there have been structural shifts in the makeup of the money supply because of the new money market funds that the banks can offer. Thus, Mr. Held says the Fed has decided to use the period after March as its base to determine the growth of the money supply instead of the January-March period. M-3, a broader measure of the money supply, has grown at a slower rate - and has stayed within its target range of 6 1/2 to 9 percent.
Despite these concerns, Edward Yardeni, chief economist at Prudential-Bache Securities, believes interest rates are headed lower. ''Inflation will be very low this year,'' he says, ''running at about a 3 percent rate.'' If the price of oil continues to drop, he adds, ''the risk on inflation is on the down side.''
With such a low inflation rate, he figures interest rates are historically high and should go lower. By year-end, the prime interest rate and the rate on long-term government bonds could be 8 percent, down from the current 10 1/2 percent.
John Paulus, chief economist at Morgan Stanley & Co., likewise believes the rates will be moving lower - provided the economic rebound remains modest. Mr. Paulus declares, ''When it becomes clear that only a moderate rebound is under way . . . rates should fall further, probably in the spring.'' He expects this decline to be on the order of 1 percent.
Mr. Paulus, however, forecasts that rates will rise if the economy springs back more strongly than anticipated. Yields on long-term government bonds would move up to the middle or upper end of the 10 to 12 percent range.
Mr. Maude of Merrill Lynch thinks interest rates will hit their low point in the second quarter, with the Fed funds rate trading at 7 1/2 percent, compared with a current 8 to 8 1/2 percent. Long-term government bonds will move down to 9 1/2 percent from their current 10.8 to 11 percent level.
But Merrill Lynch predicts interest rates will head back up by late summer. ''Not sharply,'' Mr. Maude says, ''but up.'' Behind the upward pressure, he believes, will be a tightening up by the Fed once the economy gets moving. ''The Fed will want to be convinced the economy won't falter before it leans against the wind,'' he says.
By midsummer, investors will also begin to wonder if President Reagan will reappoint Paul Volcker as chairman of the Fed. Mr. Volcker's term expires Aug. 6. As Jack Lavery, chief economist at Merrill Lynch, says, Mr. Volcker was appointed by a Democratic President - Jimmy Carter. ''If Volcker departed,'' Mr. Lavery comments, ''he might be indirectly blamed for the protracted recession, and he would not be there in 1984 to share credit with the administration for the improvement in inflation.''
Mr. Volcker, however, has developed a considerable amount of respect within the investment community. Thus, Mr. Lavery says, ''The President is surely aware that Volcker is a tough act to follow.'' Mr. Lavery believes the President will ask the Fed chairman to stay on - at least through November 1984. This would soothe the financial markets before the election.
Although Wall Street is not as concerned about the huge federal deficits as it once was, Henry Kaufman, chief economist at Salomon Brothers, recently sounded the alarm again. Mr. Kaufman, in a speech in Washington before the National Press Club, warned that the 1983 and 1984 budget deficits - estimated at $208 billion and $189 billion, respectively - could ''price'' corporations out of the financial markets as they competed with the US government. Thus, Mr. Kaufman urged Congress to cut the deficits by raising new revenues and cutting expenses. If interest rates were to move back up, he warned, it would dampen business activity, causing ''the gravest risks'' to the financial community.