Federal Reserve watchers said the central bank will abandon itspatient policy stance and cut interest rates incoming months as President Donald Trump's planned new tariffs onMexican goods may drag down U.S. economic growth.

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JPMorgan Chase & Co. chief U.S. economist Michael Feroli nowprojects quarter-point rate reductions in September and December,while Barclays Plc's Michael Gapen sees a half-point cut inSeptember followed by another quarter-point by yearend. NatWestMarkets economists and former Fed Governor Laurence Meyer also saidthe central bank will act to bolster an economy that is beingbuffeted by trade tensions and other headwinds.

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“Even if a deal is quickly reached with Mexico, which seemsplausible, the damage to business confidence could be lasting, withconsequences that might still require a Fed response,'' Feroli saidin a note to clients on Friday.

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President Donald Trump said late Thursday that the U.S. wouldput 5 percent duties on all Mexican imports on June 10, rising inincrements to 25 percent in October, unless Mexico halts “illegalmigrants” heading to the United States. Stocks fell on the news,and investors increased bets that the central bank would easepolicy this year.

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Fed Vice Chairman Richard Clarida said on Thursday, beforeTrump's announcement, that the central bank would be prepared toease policy if it saw mounting risks to the U.S. economicexpansion.

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Feroli said the Fed “may well need to cut by much more than 50basis points'' if the tariffs on Mexico are raised to 25 percent.Gapen wrote that “earlier action is not out of the question, in ourview, if financial conditions deteriorate rapidly,” a view echoedat NatWest by chief U.S. economist Michelle Girard.

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Meyer, in a note to clients on Thursday before Trump's tariffannouncement, predicted the Fed would reduce rates this year.

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“We don't think the sky is falling,” said Meyer, who headsMonetary Policy Analytics in Washington. “Rather, we think that bySeptember the argument will prevail that, after a long period ofpatience, a 25-basis-point rate cut would represent a prudentrecalibration of monetary policy.”

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Meyer listed a sharper-than-expected slowdown in growth, tighterfinancial conditions, and weak core inflation as reasons why theFed will “soon become impatient.”

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