A subdued start to 2016 for the US economy coupled with depressed inflation expectations will probably prompt the Federal Reserve to keep interest rates unchanged this week, as chair Janet Yellen insists on an ultra-cautious approach to normalising monetary policy.

While financial market optimism has recovered sharply since policymakers last convened in March and corporate hiring has been robust, US growth and inflation have softened and a number of policymakers remain anxious about risks overseas.

Among the hazards ahead is Britain’s referendum on its EU membership, which will happen only days after the Fed’s June meeting. If markets are shaky in the lead-up to that event, it will strengthen voices calling for a further delay as the US central bank inches its way towards tighter monetary policy.

Having pushed through the first rate increase in nearly a decade in December, Ms Yellen has suggested that she wants to tread carefully as she ponders when to act again. Diane Swonk of DS Economics said she expected Wednesday’s statement to leave the door open for a rate move this June, but offer no guarantees.

“Any sense of optimism should be tempered by the description of the economic activity data received since the last meeting, which have been disappointing,” said Michael Feroli, US economist at JPMorgan Chase. “The inter-meeting developments relating to inflation and inflation expectations generally moved in the wrong direction.”

The Fed is divided between officials who think it is risky to wait any longer given the potential for a pickup in inflation, and more cautious policymakers, among them Ms Yellen, who fret about the dangers of lifting rates precipitously and being forced into a U-turn. “You don’t get the sense going into this [meeting] that there is a solid consensus,” Ms Swonk said. “It is more dissonance than a symphony.”

Among the reasons for caution are poor activity data in the opening months of 2016. The New York Federal Reserve’s economic modelling points to gross domestic product growth of just 0.8 per cent in the first quarter, followed by expansion of about 1.2 per cent in the second. Early indicators of activity in the second quarter have also been sluggish: the Philadelphia Fed’s business outlook survey indicator fell into negative territory in April.

Inflation numbers have also lost altitude after a jump early this year. Core inflation measured by the personal consumption expenditures measure looks set to retreat to about 1.5 per cent for March, well below the Fed’s 2 per cent target, while surveys point to subdued inflation expectations.

Set against that sluggish picture is robust hiring, with employers taking on more than 200,000 people a month. Esther George, the Kansas City Fed chief, has already dissented in favour of a rate rise this year, and Loretta Mester of the Cleveland Fed has said there were risks in waiting too long before a further increase.

Investors will on Wednesday scrutinise the Fed’s statement for any clues as to its attitude towards June. A key question is whether it reintroduces a declaration of how it views the balance of risks to the US economy. The past two meetings have seen the Fed omit this wording because of the murkiness overseas. If it inserts it and suggests the risks are nearly or entirely balanced, this would be an indicator that policymakers are leaning towards a June rate increase.

Another key piece of language is the Fed’s recent statement that “global economic and financial developments continue to pose risks”. If this wording is tempered in light of the recent rebound in equities and more positive tone surrounding China’s performance it would suggest the Fed wants a June move to be an option.

The Fed’s next meeting after this week’s is on June 14-15. That is just a week ahead of the UK’s referendum on June 23. While many investors argue a change in US interest rates just ahead of a market sensitive event would be hazardous, some Fed officials have pushed back against that view, among them James Bullard of the St Louis Fed.

That said, the Fed also meets in late July, which means a delay because of the UK vote would only mean waiting a handful of weeks. Roberto Perli of Cornerstone Macro said: “Should markets act up as we approach the date of the referendum, the Fed would probably want to postpone any planned rate hikes. It would be just a postponement, though, not a complete change of heart.”