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Rate Cut or Hike? (Depends Who You Ask)

Which way will the Federal Reserve go? Everyone has an opinion -- and in the case of Jay Mueller, bond strategist and economist at Wells Fargo Advantage Funds, and Robert Stein, senior economist at First Trust Advisors, some opinions are the exact opposites. The two joined "Morning Call" to debate the Fed's intentions.

Mueller told CNBC's Mark Haines that the Fed will cut rates toward the year's end. He said the market is "looking for two cuts over the next 12 months -- and I think that's about right." What about inflation fears? The bond strategist believes "the Fed will be pleased" that inflation is coming back within their target range over the next one to two quarters.

Stein's outlook is diametrically opposed: He predicts a hike of 25 basis points near year end, at the December meeting -- then two 25-point hikes in the first half of 2008, in response to higher-than-expected inflation and economic growth.

Haines asked the senior economist how his view meshes with the housing downturn and slowing capital spending. Stein said he believes housing has gone through all its adjustments already, and will be less of a drag; he sees business investment and exports rising, thanks to ripples from the dollar's depreciation.