President Mario Draghi gave little indication about the next steps for monetary policy in the euro zone during a speech on Wednesday ahead of a key meeting between central bankers.
The European Central Bank chief seemed to have learned from his own mistakes by avoiding commenting on how and when he might bring monetary stimulus to an end.
Speaking at a conference in Lindau, Germany, Draghi praised economists' research and said that adjustments to monetary policy are "never easy." However, he made no reference to how the bank might adjust its own policy to the improving economic data across the euro zone, a highly debated issue among market participants.
"While forward guidance (a tool used by central banks to influence, with their own forecasts, market expectations) is a useful instrument, recent research has highlighted that its effectiveness can be improved if combined with other non-standard monetary policies," Draghi said Wednesday.
At a meeting in June, the ECB recognized the improved economic outlook in the 19-member area and the lower deflationary pressure. As a result, the bank decided to update its forward guidance to remove the reference to further rate cuts.
Christopher Pissarides, Nobel Laureate and professor of economics at the London School of Economics, told CNBC Wednesday that he expects a gradual tapering to be announced later this year.
"Over the next few months, in the autumn maybe come winter, we should be going back to the normal situation where these unconventional measures, as they're called, aren't used very much," he said.
The June mistake?
Back in June, Draghi rattled markets with a speech at a banking conference in Sintra , Portugal.
"All signs now point to a strengthening and broadening recovery in the euro area," he said at the time.
Bond yields – which move inversely to bond prices – and the euro rose as investors foresaw a closer end to the central bank's monetary stimulus. Members of the ECB subsequently spent the following days telling the markets that quantitative easing (QE) wasn't coming to an end for now.
The euro (Exchange: EUR=) was up about 0.17 percent on Wednesday against the U.S. dollar (STOXX: .DXY) at $1.1780 after Draghi's speech and after new data showing better-than-expected PMIs (purchasing managers' index) for the bloc.
A stronger euro (: EURUSD=) acts as a deflationary pressure, which the ECB wants to avoid. The euro has risen about 12 percent against the U.S. dollar so far this year, mainly on expectations of an ending to QE.