No more rants I promise Tom Keane Lisa bravas and Jonathan Ferro brammo told me off futures up to under it on the NASDAQ 100 at 1.35% on the S&P of 42 of 9 tenths of 1% It was in three basis points on tens one 93 25 CPI tomorrow The estimate coming in just a little bit 7.2% for the month of January's CPI year on year in America The Bank of England chief economist mister pill speaking right now the prospect of more hikes in the coming months prospective path for rates is uncertain They do not want to define this Tom just like the Federal Reserve There is a case for a measured approach to decisions Just a feeling Tom for some people that we front load some of this Maybe the Bank of England at the fed and then we pause We wait It's fascinating Again we'll recalibrate tomorrow at 8 30 24 hours are now exactly We'll get that important inflation at report This is a joy because Deutsche Bank has dropped this week a wonderful essay on the dynamics of productivity the multiple ratios of productivity and particularly outrage dynamics and in this case rising wages then folds into a better America through better productivity Matthew lizette joins us right now the chief U.S. economist at Deutsche Bank Matt what a tour de force and you can go from say nude and John Bates Clark after the laureate tale Jorgensen at Harvard and there's just been this raging debate about productivity Give us the modern linkage of rising wages into this good thing better productivity First thanks so much for having me I really think the way that we typically think about productivity and wages from a macro perspective is actually all wrong And so the typical linkage that we have is that you need to see productivity gains in order for that to feed into real wage growth And if you're seeing wages that are outstripping productivity that there's concerns about margins from a corporate perspective I think empirically the causation runs exactly the opposite way And you tend to see wage gains leading productivity It's very robust relationship over the past three or four decades It appears that we've seen high productivity growth in the U.S. have all been driven by tight labor markets And I think that's really an upside from the current environment where we're seeing the employment cost index growth hitting the highest since the mid 1980s It is suggestive that we're going to see a productivity boon over the next two years And the logic is essentially if it's difficult to find labor if it's expensive to find labor what you tend to see firms do is invest and they optimize their inputs which leads to productivity down the road Okay so we're going to put the cart before the horse I get that with this modern lizette wage theory That's fine but does the advantage just disperse across a broad section of American labor or is this just once again the haves take all the gains I think what we've seen historically and I think this was the big takeaway from the last cycle and from the fed's policy framework is that it takes time for those gains to disperse You needed to see the record long expansion that we had last time over ten years And so I think early part of the cycle and kind of where we are at the moment it is not as widely as far as it can be as you go forward If we take a step back and then ask what does this mean for the Federal Reserve I think it does mean look they have to be hawkish today They have to take them out of cherry policy over the coming months in order to combat the upside risk to inflation and hopefully help to bring inflation pressures down But they also have a really difficult task ahead of them which is landing this economy that's going to show We think 7.2% headline inflation tomorrow in a soft landing to make sure that this recovery does continue and we see broader spread gains across the labor market Matt I'm trying to dovetail your idea here with what we heard from Rebecca Patterson And what we heard from RBC's Amy Wu silverman Rebecca Patterson coming out and expecting a 5% inflation rate in the next 12 months or 12 months from now Amy was silverman saying she's seeing weakness among consumers that perhaps is not getting priced into the market yet Can you square these two opinions with the lizette call Sure So the way that I'm thinking about the inflation side of things and we have 3% core PC inflation for the end of this year And that is both I think driven by the supply side and the controls that we have there but also the demand side and the strength that we've seen there I think we've seen some recent evidence on the goods demand side that that is beginning to dissipate which I think is somewhat of a welcome event or realization from an inflation perspective And we've also seen inventories begin to build there which I think is also helpful in order to bring inflation down On the consumer front I think that there is so much focus on the aggregate consumer which looks great from an aggregate perspective net worth at record high levels debt to income ratios have come down debt service ratios of record low levels 2.5 trillion of.