J.P. Morgan & Co.'s Morgan Guaranty Trust Co. is predicting that the Federal Reserve will raise the fed funds rate 225 basis points more by the end of the third quarter of 1995.

That far exceeds most economists' expectations, many of which are for a fed funds rate of 5.75% at yearend 1995, 125 basis points lower than Morgan is predicting.

But Morgan, which on Friday revised its 1995 estimate for the rate on overnight loans among banks from 6% to 7%, said the Fed's commitment to slow growth, demonstrated by last week's 50-point rate increases, would require much larger increases in the future.

"Increasingly, hard-to-deny signs that cyclical price pressures are building suggest that growth will need to fall below its long-run pace to effectively cap inflation," Morgan economist Paul D. Mastroddi wrote.

Fellow Morgan economist Marc W. Wanshell said: "Ongoing economic developments this year have tended to accelerate the timetable for tightening viewed as appropriate by Fed officials.

"At this point, the probability that the next tightening move will come before the November meeting appears about equal to the probability it will come at the meeting," he added, referring m a Federal Open Market Committee meeting.

"There is very little chance that policy will be kept on hold beyond the November meeting."

By contrast, economists like Ken Ackbarali at First Interstate Bancorp,. Los Angeles, say there is little chance the Fed will move before November.

Inflation fears cited by the Morgan economists are overblown, Mr. Ackbarali said. He predicted the price of oil would drop more than 10% by yearend. and he said the 30-year Treasury bond's yield would drop from 7.5% to 7% by then.

If the Fed were to increase the funds rate to 7%.by the end of 1995, "it would have enormous repercussions throughout the entire economy," he added.

Housing demand and construction would fall off, hurting most sectors. But banks would see an influx of funds into certificates of deposit and savings and checking accounts, he noted.

Darwin Beck, a senior economist at CS First Boston, questioned whether banks would respond with higher interest rates on savings accounts as they have done in matching prior Fed rate hikes by increasing their prime lending rates almost instantaneously.

Banks could very well maintain the current savings rates, he said.

But if the Fed does raise short-term rates to 7%, he said, "there would be a significant slowdown in the economy, possibly tipping it into recession."

Both Mr. Ackbarali and Mr. Beck predicted that the funds rate would be 5.75% come the end of 1995. Mr. Beck said inflation would only be modest, though he does concede that inflation may become more of a problem than in his current forecast.

Mr. Wanshell predicted the Consumer Price Index would be 4% for next year, which would be viewed by the Fed as a serious Setback.

And Mr. Mastroddi questioned whether higher interest rates would hurt the, economy.

"The evolution of the economy this year points to increasing resilience to higher interest rates," he said. "Domestic spending has successfully made the transition from reliance on interest-ratesensitive sectors to non4nterestrate-sensitive sectors."

The Fed's tightening moves should be fairly steady, he concluded, with the funds rate at the end of 1994 settling at 5.50%.

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