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By Richard Leong

NEW YORK, Aug 26 (Reuters) - Interest rates traders raised their view the Federal Reserve would hike U.S. rates by the end of 2016 after Fed Chair Janet Yellen said the case for higher rates has strengthened on an improving labor market.

Yellen did not indicate when the U.S. central bank might raise rates in her speech on Friday at a meeting of central bankers in Jackson Hole, Wyoming.

"In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months," Yellen said.

Her comments on a possible rate increase in the coming months echoed other policymakers in recent days who had raised the likelihood of such a move even in the face of soft global growth and domestic inflation stuck below the Fed's 2 percent goal.

"On balance, it strengthened the case for a December move," said Bill Northey, chief investment officer for the private client group at U.S. Bank in Helena, Montana.

Federal funds futures implied traders saw about a 58 percent chance the Fed would hike rates at its Dec. 13-14 policy meeting, compared with a 52 percent chance late on Thursday, according to CME Group's FedWatch program.

Fed funds futures, which move inversely to where traders see the fed funds rate, traded in a tight, choppy range.

They initially fell on Yellen's prepared remarks but quickly rebounded as the entirety of her speech reinforced the view the Fed would stick to a gradual path on rate hikes. They moved lower again on renewed bets on a December rate increase.

"What has been impressed on us by Yellen and other Fed officials at this point is that rates are going be lower for longer," Northey said.

(Reporting by Richard Leong; Editing by Chizu Nomiyama and Meredith Mazzilli) ((richard.leong@thomsonreuters.com; +1 646 223 6313; Reuters Messaging: richard.leong.thomsonreuters.com@thomsonreuters.net; Twitter @RichardLeong2))