Kevin Warsh's Jackson Hole remarks pushed the implied probability of a September rate rise to around 58 percent from 35 percent a day earlier, a sharp repricing for such a short window. Short-term Treasury yields rose more than longer-dated ones, reflecting the direct link between near-term Fed expectations and the front end of the curve. Equities tied most closely to the domestic economy underperformed, with small caps and industrials leading declines, a pattern consistent with markets pricing in tighter policy at a moment when consumer spending has shown signs of softening. The move also complicates the recent stabilisation in longer-term yields that followed the Treasury's buyback announcement, since a more hawkish Fed reduces one of the forces that had been pulling those yields down. With low summer trading volumes and a Fed decision still three weeks away, positioning could remain volatile into the September 16 meeting.---Also in the news ahead of the Globex open coming up at 6pm US Eastern time:U.S. forces have struck two Iranian launchers near Strait of Hormuz---Warsh's inflation warning at Jackson Hole revived hike bets and rattled markets just as investors thought the summer lull would hold.Summary:Fed chairman Kevin Warsh signalled greater concern about inflation than expected at the Kansas City Fed's Jackson Hole symposium.Interest-rate futures showed a roughly 58% chance of a September hike, up from 35% the previous day.The Dow slipped under 0.1%, the S&P 500 fell 0.2% and the Nasdaq dropped 0.5%, a milder reaction than after Warsh's June and July Fed meeting comments.The remarks eased concern that Warsh would avoid hikes under political pressure, but raised worry that the Fed is now boxed into raising rates regardless of incoming data.The 30-year Treasury yield eased to 5.207% following the Treasury's recent move to double long-bond buybacks, while the 10-year yield rose to 4.721%.Small caps and industrial stocks underperformed, and the S&P 500 remains about 1% below record highs heading into the Fed's September 16 decision.Federal Reserve chairman Kevin Warsh unsettled markets on Friday with unexpectedly hawkish comments on inflation, sending short-term Treasury yields higher and knocking major stock indexes lower, according to the Wall Street Journal. Delivered at the Kansas City Fed's annual symposium in Jackson Hole, Wyoming, the remarks pushed traders to price a roughly 58 percent chance of a September rate increase, up sharply from 35 percent just a day earlier, based on CME Group data.The reaction was more contained than after Warsh's two previous high-profile appearances as chairman. His June press conference surprised markets with similar inflation concern, while his July comments had the opposite effect, prompting doubts about whether he would follow through on hawkish rhetoric with actual policy. Friday's speech split the difference, leaving investors uncertain whether the Fed is now committed to a hike or simply keeping its options open ahead of the September 16 meeting.The bond market has been the more volatile corner of markets in recent months even as stocks continued to climb. The 30-year Treasury yield pushed above 5.3 percent in the weeks following July's meeting, its highest level since 2007, prompting the Treasury Department to announce it would double its purchases under an existing buyback program. Treasury Secretary Scott Bessent had said the move was intended to bring down longer-term yields that he viewed as detached from economic fundamentals, and it appeared to have some initial success, with the 30-year yield easing to 5.207 percent by Friday even as the more consumer-relevant 10-year yield rose to 4.721 percent.Equity investors have largely shrugged off the bond market turbulence, focused instead on the tail end of earnings season and a blowout Nvidia report that eased concerns over AI chip demand. Still, Friday's declines in small caps and industrials suggest markets remain sensitive to rate-path uncertainty. With trading volumes near their lowest levels of the year and September historically a rocky month for stocks, attention now turns to whether incoming data will validate the hawkish tilt or force another change of direction from Warsh before the Fed's next decision. This article was written by Eamonn Sheridan at investinglive.com.