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.