* Fed announcement expected at 2 p.m. ET (1800 GMT)
* Yellen speaks half an hour later
* U.S. fund futures see 25 pct chance of hike on Thursday
* Verizon weights the most on the Dow, S&P
* Indexes up: Dow 0.05 pct, S&P 0.06 pct, Nasdaq 0.22 pct (Changes comment, updates prices)
By Tanya Agrawal
Sept 17 (Reuters) - U.S. stocks were marginally higher in thin late-morning trading on Thursday, with investors reluctant to trade aggressively ahead of the Federal Reserve's interest rate decision later in the day.
The Fed will announce the outcome of its policy meeting and release its latest economic projections at 2 p.m. ET (1800 GMT), followed by a news conference by Chair Janet Yellen at 2:30 p.m.
An increase in the Fed's benchmark rate, which has been held near zero since the depths of the financial crisis in December 2008, would be the first since 2006.
The low rates have helped nurse the economy back to health since the crisis and underpinned a spectacular six-year bull run for stocks. However, there are concerns that continuing with ultra-low rates for too long could lead to asset bubbles such as the one in property prices that led to the last recession.
U.S. interest rates futures indicated a 25 percent chance the central bank will raise rates on Thursday, while 35 of 80 economists polled by Reuters expect a move.
"If the Fed does raise today, the market will sell off but that is not going to last because the U.S. consumer is very strong," said Philip Blancato, chief executive at Ladenberg Thalmann Asset Management in New York.
The focus will move to the next Fed meeting on Oct. 27-28 if the central bank doesn't pull the trigger.
Whether or not the Fed moves on Thursday, investors will be hanging on every word during Yellen's news conference.
Uncertainty about when the Fed will switch gears has dogged Wall Street for months - a situation that has been complicated in recent weeks by market turbulence linked to slowing growth in China and worries about the health of the global economy.
However, many analysts say a rate hike now would at least remove a lot of the uncertainty that has troubled investors.
At 11:14 a.m. ET, the Dow Jones industrial average was up 9.01 points, or 0.05 percent, at 16,748.96, while the S&P 500 was up 1.23 points, or 0.06 percent, at 1,996.54 and the Nasdaq Composite index was up 10.89 points, or 0.22 percent, at 4,900.13.
Six of the 10 major S&P sectors were higher, with the energy index's 0.82 percent rise leading the way as oil prices held on to most of Wednesday's big gains.
The telecommunications index's 2 percent loss led the decliners. Verizon's 2.9 percent fall weighed most on the Dow and the S&P after the company said it expected 2016 earnings to "plateau" amid stiff competition.
The CBOE volatility index, known as Wall Street's "fear gauge", was up 1 percent at 21.51, above its long-term average of 20, after hitting a high of 22.56.
"If the Fed doesn't raise today, we can expect volatility to be elevated as we head into early October," said Blancato.
The Fed has said it will raise rates when it sees a sustained recovery in the economy.
Data on Thursday showed the number of Americans filing new applications for unemployment benefits fell last week to the lowest level in eight weeks.
Other data showed that housing starts fell more than expected in August, but a rebound in building permits pointed to strength in the housing market, which should support economic growth.
Cablevision jumped 15.2 percent to $32.89 after European telecoms group Altice agreed to buy the company in a deal valued at $17.7 billion.
Oracle fell 3.5 percent to $36.94 a day after the company warned that revenue could fall in the current quarter.
Rite Aid dropped 10.8 percent to $7.67 in heavy trading after the drugstore chain operator cut its full-year sales and earnings forecasts.
Advancing issues outnumbered decliners on the NYSE by 1,565 to 1,245. On the Nasdaq, 1,651 issues rose and 948 fell.
The S&P 500 index showed eight new 52-week highs and one new low, while the Nasdaq recorded 31 new highs and 22 new lows. (Reporting by Tanya Agrawal; Editing by Ted Kerr)