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TREASURIES-Yields jump as Fed keeps December rate hike alive

(Recasts with Fed statement, new throughout)

* Fed signals another rate hike likely this year

* Ten-year Treasury yields highest since Aug. 8

NEW YORK, Sept 20 (Reuters) - Benchmark U.S. Treasury yields jumped to their highest levels in six weeks on Wednesday after the Federal Reserves statement from its September meeting was interpreted as keeping a December interest rate hike on the table. New economic projections released after the Fed's two-day policy meeting showed 11 of 16 officials see the "appropriate" level for the federal funds rate, the central bank's benchmark interest rate, to be in a range between 1.25 percent and 1.50 percent by the end of 2017, one-quarter of a point above the current level. The Feds economic projections for 2017 were unchanged, said Charlie Ripley, investment strategist at Allianz Investment Management in Minneapolis. That gives us a little bit more confidence that there is probably going to be a third rate hike coming in December, Ripley said.

Benchmark 10-year notes fell 11/32 in price to

yield 2.29 percent, up from 2.24 percent before the Feds statement and the highest level since Aug. 8. Interest rate futures traders are now pricing in a 72 percent chance of a December rate hike, up from 68 percent before the statement, according to the CME Groups FedWatch Tool. The Fed also said it would begin in October to reduce its approximately $4.2 trillion in holdings of U.S. Treasury bonds and mortgage-backed securities, as expected, by initially cutting up to $10 billion each month from the amount of maturing securities it reinvests.

(Additional reporting by Saqib Ahmed; Editing by Cynthia Osterman)

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