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Fed and ECB accused of 'muddying the waters'

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As markets digest monetary policy statements from three of the world's major central banks within 24 hours, two of the institutions have been hit with accusations of causing confusion and lacking transparency by economists.

The U.S. Federal Reserve kicked off the medley of announcements on Wednesday, and was closely followed by the Bank of England (BoE) and European Central Bank (ECB) on Thursday.

(Read more: Bonds take swift turn, but Fed taper on track)

All three banks agreed that consumer and business confidence was on the up, giving a boost to long term growth prospects, but both the ECB and the Fed "muddied the waters" and lacked transparency, according to some economists.

Jennifer McKeown, senior European economist at Capital Economics, said there was "significant confusion and some disappointment" about ECB President Mario Draghi's lack of clarity on the longer-term policy outlook.

(Read more: Fed tapering will be for wrong reason: El-Erian)

"Despite trying to improve the ECB's transparency last week, president Draghi seems mainly to have muddied the waters," she said. "Admittedly, he added some detail to last month's pledge that interest rates would 'remain at present or lower levels for an extended period' by stating that markets' expectations of a hike in late 2014 were 'unwarranted'. But despite this, markets' rate expectations have since edged up."

McKeown said the ECB's "hawkish reputation" – as a result of the implementation of two unexpected rate hikes - was not helped by Thursday's meeting. Draghi's particular focus on the inflation outlook had done little to "assure markets that the Bank will not make the same mistake again," she said.

"In all, the bank has a lot more work to do if it wants to be considered a truly transparent institution," she added.

(Read more: ECB's Draghi confirms forward guidance)

McKeown's comments echoed remarks made last month by Richmond Fed's Robert Hetzel and International Monetary Fund chief Christine Lagarde. Hetzel described the ECB as lacking a "coherent strategy" and urged it to stop using monetary policy as a "lever for achieving structural changes and to end its contractionary policy," while Lagarde warned central banks that any pulling back must be flexible, visible and predictable.

Alan Higgins, chief investment officer at Coutts, was also left confused by the central bank announcements, but rather than bashing the ECB, he accused the Fed of lacking a clear plan.

Fed Chairman Ben Bernanke's said on Wednesday that rates would not increase anytime soon, and its monthly bond buying program – known as quantitative easing or QE - would be trimmed back only if the data points, particularly on unemployment, continued to improve.

(Read more: Bank of England holds fire before key inflation report)

"European policymakers are trying hard to bring down long-term interest rates and assist economic recovery by adding clarity and direction, but the Fed appears to have done the opposite," he said. "Its decisions appear more dependent on volatile data points (that are often heavily revised) than a well-thought-out exit plan."

Higgins added that while the assessments of growth were becoming more alike in Europe and the U.S., plans for how to deal with ultra-low interest rates in a recovery were starting to look very different - and in the Fed's case, unpredictable.

The U.S. central bank also raised concern about rising government bond yields – which have move higher following Bernanke's comments to Congress about QE in June - and the impact this will have on the housing market.

But this reference to the run-up in mortgage rates as a result of rising yields added yet another "worry to the list," according to Higgins. "The Fed has in effect made it more difficult to work out its next move."

By CNBC's Jenny Cosgrave: Follow her on Twitter @jenny_cosgrave


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