Stock index futures were higher before Wall Street's opening on Wednesday in the run-up to the Federal Reserve's monetary policy announcement, the highlight of which is expected to be a cut in interest rates.

The Federal Open Market Committee (FOMC) is scheduled to issue its statement on interest rate policy at 2:15 p.m. EDT.

A rate cut ... would pull stock markets higher, Rick Nelson, chief investment officer at ING Investment Management in New York, said in a note.

The benchmark S&P 500 index rose as much as 6.7 percent in the three weeks that followed the Fed's 50 basis point rate cut on September 18. Including Tuesday's 0.65 percent drop, it has fallen 2.9 percent since.

Financial markets are now pricing in a quarter of a percentage point cut.

Anything but a 25 basis point cut would come as a surprise, said Italian bank UniCredit. The Fed will not take the risk to alienate investors by cutting rates by 50 basis points or even leaving rates unchanged.

The risk of a big step is clearly that investors would fear that things are even worse than previously expected. On the other hand, leaving rates unchanged would clearly disappoint the market, limiting hopes that central banks have the appropriate instruments to combat the real cause of the crisis, it added.

At 5:25 a.m. EDT, future contracts on the Dow Jones, the S&P 500 and the Nasdaq were all up by 0.2 percent.

The indicative Dow Jones index, which reflects how the Dow stocks are traded in Frankfurt, was 0.1 percent higher.

S&P 500 companies scheduled to report quarterly results on Wednesday include oil major Exxon Mobil, packaged food maker Kraft Foods, life insurer Prudential Financial and timber company Weyerhaeuser.

DATA DELUGE

But with the Fed decision looming, many market players will likely pay closer attention to the raft of data due for release while the FOMC meeting is still going on, as economists say such numbers could conceivably influence the interest rate decision or the tone of the accompanying policy statement.

A weekly mortgage market index is due at 7:00 a.m., the ADP October employment report at 8:15 a.m. EDT, advance third-quarter GDP data and employment costs at 8:30 a.m. EDT, the New York NAPM index of regional business activity for October at 9:00 a.m. EDT, the Chicago NAPM October index of manufacturing activity at 9:45 a.m. EDT and nationwide September construction spending at 10:00 a.m. EDT.

Taken together, these releases will provide more information about the health of the world's largest economy.

BNP Paribas economists said that early next year the Fed funds rate could go below 4 percent, from 4.75 percent now.

However, this easing of monetary policy, motivated by preventing the U.S. economy from sliding into recession, is unlikely to suffice to reinvigorate the economy in the short term, BNP Paribas said in a note.

Societe Generale, another French bank, said such rate cut expectations looked too aggressive.

The Fed just wants financing market conditions to stabilize, for uncertainty to fade and for bank lending to resume, Societe Generale said in a cross-assets research note.

U.S. stocks fell on Tuesday after a weak outlook from Procter & Gamble, disappointing earnings from U.S. Steel and a report showing consumer confidence at a two-year low fuelled worries about the economy, consumer spending and corporate profits.

The Dow Jones industrial average fell 0.56 percent, the S&P 500 lost 0.65 percent, and the Nasdaq eased 0.03 percent.

Exxon mobil U.S.