Fast tax refunds and slow payments prolong stimulus, esp for high-income

What the desk is arguing

BofA argues that lower tax payments relative to last year are shifting the timing of fiscal stimulus later into the first half of 2026, with refund growth in the high single digits year-over-year. The net effect is a total stimulus increase of about 25%, with middle- and higher-income consumers benefiting most, partly due to higher SALT deductions. This could prolong consumer spending boosts into mid-2026.

Where it sits in our coverage

Our internal consensus views USD as supported in the near term given resilient US consumption, but the extended stimulus timeline may delay any weakening in the dollar. We see EUR/USD trading in a 1.08-1.12 range, with a bias toward the lower end if stimulus persists. The firm spread is mixed, with some analysts expecting a mild USD depreciation later in 2026 as the Fed eventually pivots.

How other firms see it

• Goldman Sachs notes that persistent fiscal stimulus could keep US growth above trend, supporting USD, but warns that the benefit is concentrated among higher-income groups, limiting broad-based consumption.
• JPMorgan highlights that the extension of stimulus via tax timing may offset some headwinds from higher tariffs, but sees risks that inflation expectations could rise if the consumer remains strong.
• Morgan Stanley is more cautious, arguing that the SALT-driven boost is geographically concentrated and may not translate into sustained national spending, keeping USD neutral to slightly bearish.