WASHINGTON (Reuters) - U.S. unit labor costs grew far less than initially thought in the third quarter, pointing to a still favorable inflation outlook even though price increases have not moderated much in recent months.

Unit labor costs - the price of labor per single unit of output - increased at a 0.8% annualized rate last quarter, the Labor Department of Labor's Bureau of Labor Statistics said on Tuesday. Economists polled by Reuters had expected labor costs growth would be revised down to a 1.5% rate from the previously reported 1.9% pace in the July-September quarter.

That followed a downwardly revised 1.1% pace of decline in the second quarter. Labor costs were previously reported to have advanced at a 2.4% rate in the April-June quarter. They increased at a 2.2% pace from a year ago, revised down from the previously reported 3.4% rate.

The Federal Reserve is expected to cut interest rates next week by 25 basis points, the third reduction in borrowing costs since it started its monetary policy easing cycle in September.

Nonfarm productivity, which measures hourly output per worker, increased at an unrevised at a 2.2% pace.