It’s Fed day.

The central bank will announce its policy decision at 2 p.m. ET, and Jerome Powell will hold a press conference afterward.

As far as policy, there’s effectively zero chance of a surprise today — no major Wall Street bank expects a change.

As for markets, anything is fair game.

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The upside of a data-dependent Fed

The case for the Fed to cut interest rates seems to get weaker by the day.

On Tuesday, government data showed the employment cost index — a broad gauge for labor costs — clocked in hotter than expected for the first quarter, at 4.2% annually.

Higher wages might sound good at first, but not when the trend spikes by the most in a year.

The surge implies companies could pass on those costs to consumers, which in turn marks the latest evidence of sticky inflation, 

Markets recognize that.

Stocks sold off and bond yields spiked after the data dump. 

“Faster wage growth, even if driven by a one-off increase in the California minimum wage rate for fast food workers, may leave the Fed wanting more data and favoring a higher-for-longer policy stance in the meantime,” Bank of America strategists told clients Tuesday.

Each of the three major indexes notched their first losing month of the year, and Powell is unlikely to grant traders (or the White House) reason to celebrate anytime soon. 

Remember, in December Wall Street had forecasted as many as seven rate cuts this year.

That optimism manifested in a strong first-quarter stock rally.

Four months later and markets see odds for one cut or zero this year.

So, don’t look for the central bank to announce any changes to the federal funds rate today.

Powell will likely reiterate the need for “greater confidence” on inflation’s trajectory. 

It’s also possible he says the outlook for a soft landing remains intact, despite the choppy data. 

Whether he believes it or not, comments along those lines could soothe some jitters in the market. 

There’s little Powell can say, however, that will change just how hot economic data has looked through the first quarter. 

Falling equities suggest investors are coming to terms with this.

Over the last few weeks, some analysts have predicted that an upbeat earnings season would be enough to reverse April’s sell-off.

Still, JPMorgan strategist Marko Kolanovic’s April 17 call has proved most prescient so far:

“For a market reliant on immaculate disinflation, a dovish Fed reaction function, and diminishing tail risks on growth, the continuation of hot growth and inflation data can bring us to a tipping point where a tighter stock vs bond risk premium finally produces a market correction.”

*At a glance:

Elsewhere:

Rapid-fire:

Last thing:

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