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UPDATE 3-Hong Kong prepares for Halloween protests with city in recession

* First time protesters have targeted famous party district

* Economic data confirms Hong Kong in recession

* Data set to show recession as central banks cuts rates

* Pompeo says China trampling on rights in Hong Kong (Adds recession confirmed, paragraphs 1, 7-12; Chinese reaction to Pompeo, paragraph 17)

HONG KONG, Oct 31 (Reuters) - Hong Kong police tightened security ahead of possible clashes on Thursday between masked pro-democracy protesters and Halloween fancy-dress clubbers as the Chinese-ruled city confirmed it was in economic recession after months of unrest and trade tensions.

The demonstrators, many of whom still wear now-illegal face masks, are planning to march from Victoria Park in the Causeway Bay shopping district to the hilly, narrow streets of the Lan Kwai Fong bar district above Central, the scene of a deadly New Year's stampede nearly 27 years ago.

Police have banned the march and said they would close roads, including the short Lan Kwai Fong street itself, from early afternoon until Friday morning to "facilitate the public celebrating." It was not immediately clear how that would work.

It is the first time protesters have targeted the party district in five months of increasingly violent, anti-government unrest. Typically, weekends and celebrations like Halloween see hordes of revellers spilling out of the bars and clubs.

A stampede during New Year celebrations at the end of 1992, when thousands had gathered on streets slippery with beer and champagne, killed at least 20 people and wounded scores.

Police, who have been warning for days of the threat to public order and safety, are planning to deploy 3,000 riot officers and three water cannon outside government offices near the route, according to media.

Hong Kong, as widely expected, slid into recession for the first time since the global financial crisis in the third quarter, advance estimates confirmed on Thursday, weighed down by increasingly violent anti-government protests and the protracted U.S.-China trade war.

The economy shrank 3.2% in July-September from the preceding period, contracting for a second straight quarter and meeting the technical definition of a recession. The readings were the weakest for the Asian financial hub since 2008/2009.

Hong Kong's central bank also cut rates on Thursday in step with the U.S. Federal Reserve.

"TRAMPLING" ON RIGHTS

Pressed on government plans to relieve the hit to businesses in Hong Kong from the protests, Hong Kong leader Carrie Lam told a conference the circumstances warranted "exceptional" measures.

"If we still act in the same conventional mode as if business is usual and life is normal, then we are not being very responsible," she said.

Her administration has pledged around HK$21 billion ($2.68 billion) of financial aid for business since August, from rent to fuel subsidies.

The protesters are angry at what they see as Beijing's increasing interference in Hong Kong, which returned from British to Chinese rule in 1997 under a "one country, two systems" formula intended to guarantee freedoms not seen on the mainland.

China denies meddling and has accused foreign governments, including the United States and Britain, of stirring up trouble.

U.S. Secretary of State Mike Pompeo said on Wednesday that China was "trampling (on) the most basic human rights of its own citizens".

"We have seen this in Hong Kong, where they need to live up to their promises and commitments," Pompeo said.

The Chinese Foreign Ministry denounced the comments as a vicious attack on China.

LOW PROFILE

Some protesters in Hong Kong have thrown petrol bombs at police, lit fires across the Asian financial hub and trashed government buildings and businesses, especially those seen as pro-Beijing, during recent demonstrations.

Police have responded with tear gas, pepper spray, rubber bullets and water cannon.

Some bar owners told Reuters that the police had however pledged to take a low profile on the fringes of the Halloween celebrations.

"We don't expect any trouble," said Jay Chandra, manager of the Watering Hole on Lan Kwai Fong. "Police said they would stay away, but if there was any problem they would come."

But one manager of a top-end, high-rise bar, who did not want to be identified, said it would be "madness" not to be worried and that he hoped to be able to send his staff home early.

Hong Kong's subway operator MTR Corp, which has also been targeted by protesters, said it would shut some stations earlier than usual. Central station, a few minutes walk downhill from Lan Kwai Fong, will shut by 9 p.m. (1300 GMT).

Prince Edward station, on the bustling Kowloon peninsula, would be shut from 2 p.m. as protesters planned a vigil to mark two months since large clashes between police and protesters.

A Hong Kong island theme park, Ocean Park, said it was cancelling its annual Halloween festival to ensure safety of visitors and staff.

This month, Hong Kong authorities banned protesters from wearing face masks under a colonial-era emergency law, but the measure has been largely ignored.

Halloween masks have not been banned, which would make it difficult for police to differentiate protesters from revellers in fancy dress.

(Reporting by Nick Macfie, Twinnie Siu, Jessie Pang and Tom Westbrook in Hong Kong and Cate Cadel in Beijing; Writing by Farah Master and John Geddie;)