Warsh's Jackson Hole debut puts a September hike on the table

Good morning. Fed Chair Kevin Warsh, 100 days into the job, used his first Jackson Hole speech to say inflation is not slowing in any meaningful way. That one line sent the odds of a September rate hike from about 35% to nearly 60% in a day.

The bond market took him at his word. The 30-year Treasury yield climbed to 5.19%, near a 52-week high, and real yields rose more than inflation expectations did. In other words, traders are betting the Fed will actually act, not just that prices will keep climbing. A July PCE reading that came in hotter than expected on the headline gave the hawkish tone some extra backing.

Stocks, oddly, barely flinched. The Dow finished the week higher and the VIX touched its lowest level of the year. Bonds believe in tightening; equities are not yet convinced, and that gap is the picture of the week. Meanwhile, the glow from Nvidia's earnings spread to software and memory chips, and corn and wheat hit their highest prices in over three years.

The next test comes this week with the US jobs report. Hiring is cooling while inflation is not, so either surprise could swing September rate expectations sharply.