US RATE FUTURES-Ideas of Fed hikes up but no major shift

(Adds details, analyst comments)

By Ros Krasny

CHICAGO, Aug 28 (Reuters) - Interest rate futures dealers saw no seismic shift in potential Federal Reserve policy on Thursday despite a much larger than expected revision to second-quarter U.S. economic growth.

The Commerce Department showed U.S. gross domestic product, the broadest measure of economic growth, up 3.3 percent in the third quarter, versus the original reading of 1.9 percent and Wall Street forecasts for a 2.7 percent gain.

Implied prospects for Fed rate hikes in late 2008 and early 2009 rose slightly on the data, but many dealers were inclined to view the report as "old news."

"Markets will look past Q2 GDP revisions to weakness later in the year. What goes up now probably subtracts from growth later," said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut.

Ongoing weakness in the labor market also tempered the impact of the GDP revisions.

Initial claims for jobless benefits fell to 425,000 in the week ended Aug 23, but continued claims of 3.44 million were the highest since November, 2003.

With many more Americans out of work, the potential for economic growth to continue at the second quarter's above-trend level looks more doubtful, dealers said.

"The outlook for the economy is still bleak as consumer confidence remains low ... the outlook for third-quarter GDP is less than 1 percent," said Gary Pollack, head of fixed-income trading at Deutsche Bank Private Banking in New York.

The Federal Open Market Committee meets on Sept 16 to consider its next move on interest rates, and futures show just a 14-percent chance the Fed will raise rates.

By year end, prospects for a rate hike rise to 32 percent, against 34 percent late on Wednesday. Futures fully price an increase in the fed funds rate during the first quarter of 2009.

(Additional reporting by Walden Siew in New York, Editing by Chizu Nomiyama)