By Lucia Mutikani

WASHINGTON (Reuters) - U.S. consumer confidence fell less than expected in August, with households still upbeat about the labor market despite an escalation in trade tensions, which has cast a shadow over the longest economic expansion in history.

While the survey from the Conference Board on Tuesday did not change expectations that the Federal Reserve will cut interest rates again next month, it further reduced the chances of an aggressive easing to counter the effects of the U.S.-China trade war, including tighter financial conditions.

Fed Chair Jerome Powell told a conference of central bankers last week that the economy was in a "favorable place," but reiterated that the U.S. central bank would "act as appropriate" to keep the economic expansion, now in its 11th year, on track.

The Fed lowered its short-term interest rate by 25 basis points last month for the first time since 2008, citing trade tensions and slowing global growth. Financial markets have fully priced in another quarter-percentage-point cut at the Fed's Sept. 17-18 policy meeting.

"The consumer remains confident despite the ongoing trade war between the U.S. and China and this bodes well for the economic outlook in the second half of the year," said Chris Rupkey, chief economist at MUFG in New York. "Consumers may have even seen July's rate cut as good medicine for the economy which will help keep the economy on the sustainable growth path."

The Conference Board said its consumer confidence index slipped to a reading of 135.1 this month from a slightly upwardly revised 135.8 in July. The index was previously reported at 135.7 in July. Economists polled by Reuters had forecast it dropping to 129.5 in August.

The survey's present situation measure rose to 177.2, the highest reading since November 2000, from 170.9 in July.

The Conference Board, however, cautioned that if the trade conflict persists, "it could potentially dampen consumers' optimism regarding the short-term economic outlook." Consumers' expectations, based on their short-term outlook for income, business and labor market conditions, slipped to a reading of 107.0 this month from 112.4 in July.

President Donald Trump on Friday announced a new round of tariffs on Chinese imports, hours after Beijing unveiled retaliatory tariffs on $75 billion worth of U.S. goods. On Monday, the two economic powerhouses sought to ease tensions, with Beijing calling for calm and Trump predicting a deal.

The Conference Board survey's findings are in stark contrast with a University of Michigan survey, which showed consumer sentiment dropping to a seven-month low in early August and a measure of current conditions hitting its lowest level since late 2016. According to the University of Michigan, monetary and trade policies had heightened consumers' uncertainty about their future financial prospects.

The Conference Board survey places more emphasis on the labor market, while the stock market has a huge influence on the University of Michigan survey.

The dollar was little changed against a basket of currencies, while U.S. Treasury prices rose. Stocks on Wall Street were lower.

SOLID LABOR MARKET

The Conference Board survey's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, jumped to 39.4 in August from 33.1 in July. That measure closely correlates to the unemployment rate in the Labor Department's employment report.

"This could signal a drop in the unemployment rate in August," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "So, despite growing worries, businesses don't appear to be cutting staff or even slowing the pace of hiring all that much."

The unemployment rate is at 3.7%. Other data on Tuesday showed house price inflation continuing to slow, which together with lower borrowing costs could provide a jolt to the housing market, which has been mired in weakness since last year.

The S&P CoreLogic Case-Shiller house price index for 20 metro areas increased 2.1% from a year ago in June, the smallest gain since August 2012, after a 2.4% rise in May.

The moderation in house price appreciation was also corroborated by another report from the Federal Housing Finance Agency (FHFA) showing its house price index increased a seasonally adjusted 4.8% in June from a year ago, the smallest rise since January 2015, after rising 5.2% in May.

House prices increased 1.0% in the second quarter. The FHFA's index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae and Freddie Mac.

"The increase in housing demand coming from lower mortgage rates doesna€?t seem to have been enough to prevent house price appreciation from slowing," said Daniel Silver, an economist at JPMorgan in New York.

(Reporting By Lucia Mutikani; Additional reporting by Richard Leong in New York; Editing by Andrea Ricci)