• Former White House advisor Kevin Hassett projects strong US GDP growth for Q1 2025, with inflation hitting a four-year low.
  • Pakistan's inflation rate plummets to 3.5%, a dramatic reversal from 38% in 2023, signaling a broader stabilization trend.
  • The improvements are attributed to supply-side policies and fiscal discipline, though long-term debt concerns persist.

A Turn in the Tide

Recent economic data and commentary from former Trump administration economist Kevin Hassett point to a significant cooldown in inflation alongside surprisingly resilient growth, offering a dose of optimism amid global uncertainties. Hassett projects US GDP growth of 2% to 2.5% for the first quarter of 2025, a forecast buoyed by the latest Consumer Price Index reading of 2.8% year-over-year in February—marking the lowest core inflation rate in four years.

The positive momentum isn't confined to the United States. Official data from Pakistan shows a even more dramatic disinflation, with the rate dropping to 3.5% in May 2025, a staggering decline from a peak of 38% in 2023. Forecasts suggest it could fall further to between 3.0% and 4.0% by June. This sharp reversal is credited to stable food supplies and a disciplined fiscal approach that has strengthened public finances.

Drivers of the Rebound

In the US, Hassett links the improved outlook to a continuation of policies from his tenure, including extensions of Trump-era tax cuts, deregulation, and a specific trade policy stance. "We're seeing the benefits of a supply-side approach play out in real time," a person familiar with Hassett's analysis said. Job creation in manufacturing and auto sectors is cited as a key contributor, reflecting supportive business sentiment.

Efforts to reach Hassett for further comment were not immediately successful. The parallel recovery in Pakistan, meanwhile, is attributed to tighter fiscal controls and a surge in remittances and export activity, which have boosted lending to the private sector. The country's federal receipts have been strengthened by increases in both tax and non-tax collections.

Cautious Optimism

Despite the encouraging signs, economists caution that structural risks remain. In the US, high national debt and unsustainable entitlement spending are seen as long-term threats to the current growth trajectory. The sustainability of Pakistan's recovery also hinges on maintaining fiscal discipline and navigating potential global headwinds.

Market participants are watching closely to see if these trends solidify. The sharp drop in inflation, particularly in emerging markets like Pakistan, supports confidence in the ability of economies to recover from severe shocks. For now, the data provides a compelling narrative of economic stabilization, even if the path forward requires careful navigation of unresolved fiscal challenges.