‘ECB rate cut into negative territory may be required’

The ECB could be forced to introduce another long- term refinancing operation and drag the deposit rate into a negative territory to cushion the region from another year of sluggish growth and the uncertainty caused by the comprehensive assessment of the banks, according to the Bank of America Merrill Lynch 2014 economic outlook.

Overall, the investment bank is bullish on the prospects for the global economy. For the first time in five years, Bank of America Merrill Lynch does not see any major threat to growth. The US has the potential to surprise on the upside, while some emerging markets could post above forecast growth.

The eurozone remains the laggard. The increasingly benign international backdrop will act as a bulwark against the eurozone from slipping into a debt-deflationary spiral.