The nonfarm data was too strong! A December Fed rate hike—why is the market suddenly pricing in a 77.7% probability?

If we compare the Fed to someone controlling a faucet, rate cuts loosen the flow, while rate hikes tighten the faucet.
After the U.S. October nonfarm payrolls report was released, the market suddenly realized: the water may not be ready to flow more freely yet!
The number of jobs added this time reached 165k, far exceeding the market expectation of 65k. The unemployment rate fell to 4.1%, while average hourly earnings rose 0.4% month over month.
More notably, employment figures for August and September were revised up by a combined 84k. This suggests that the employment situation the market had previously seen may have been weaker than it actually was.
When the labor market remains strong and wages keep rising, the Fed needs to be alert to inflationary pressures.
As a result, traders quickly raised their bets on a December rate hike, with the probability of a 25-basis-point hike reaching 77.7%.
But there is an important detail: this probability is calculated by the market based on financial instrument prices; it is not a decision announced in advance by the Fed.
If inflation data cools significantly in the future, market expectations could change again.
So the most interesting thing right now is not guessing what the Fed will do, but seeing whether the next economic report will make the market change its mind again.$AMD

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