Bank of England policymakers might be on a “go-slow” as they look forward to interest rate cuts this year, but the direction of travel is almost certain.

After a meeting on Thursday when interest rates were kept on hold at 4.5%, City investors bet there would be more reductions in the cost of borrowing this year, most likely two cuts reducing the rate to 4%.

And the signal from the Bank – with its calm resolve to bring the cost of borrowing into line with economic growth – should be enough for businesses and households to take a more confident and expansive view of their own and the nation’s prospects.

The negative reaction to Rachel Reeves’s first budget, where all the focus was on the tax rises and little on the spending increases, is disappearing in the rearview mirror. The sun is shining, the equinox has passed, and two years of above-inflation pay rises, which have pushed average wages back above pre-pandemic levels, have filled the bank accounts of the typical household.

At the start of 2020, the average weekly wage, including bonuses and adjusted for inflation at 2015 values, was £501 a week. After falling in value over the next couple of years as inflation soared to 11%, the real level of wages has recovered to the equivalent of £523, according to the latest figures from the Office for National Statistics.

Unfortunately for Reeves, ahead of a tricky spring statement next week and a second budget in the autumn, consumers with spare cash – mostly those in the top two-thirds of the income bands – are either paying down loans accumulated in the pandemic years or biding their time until they think it is safe to shop again.

Meanwhile, businesses are also circumspect, reviewing their finances before next month’s increase in employers’ national insurance and a 6.7% rise in the national minimum wage.

The Bank said it remained wary of making optimistic predictions. It was only last month that it shocked the economic world with a downgrade to its 2025 forecast that halved the growth rate from 1.5% to 0.75%.

In its report on Thursday, Bank officials emphasised the high degree of uncertainty posed by Donald Trump’s tactical use of trade tariffs to further his political aims. It described the situation as “rapidly evolving” and said the effects were skewed to the downside.

Trump’s mania for deploying US economic muscle to further his political dealmaking may relent over time, and then again, it may become persistent, permanently undermining global business confidence and harming business investment.

A harder line from Trump would be bad for the UK, which ranks as one of the most open trading nations in the industrialised world. It would mean the Bank going further to address the UK’s lacklustre growth rate and considering whether it needs a boost from significantly lower borrowing costs.

The City is divided about how far down the Bank will push the cost of borrowing this year and next. Some argue it will stop when the rate reaches 4%. Others see it falling to 3.5% or lower, even without the Trump effect.

One barrier to a steep fall is the high level of inflation-busting wages. The Bank is concerned that high wages and the extra taxes imposed on businesses will feed through to higher prices. What is good for the worker also limits the extent of interest rate cuts that could help mortgage borrowers.

However, employment groups expect the problem to dissipate as wages moderate and skills shortages ease. They say employers are already agreeing lower pay increases now that inflation is 3% and is only expected to peak this year at 3.7% in the autumn in response to one-off utility bill increases.

Reeves will be nervous as events unfold. When she first announced she would be doing just a statement in spring rather than a full budget, it was supposed to be an upbeat affair charting progress towards rebooting the economy. Now she must try to escape the opposition’s framing of it as austerity 2.0 with little prospect of growth, at least in the short term.

If she is lucky this year then high wages could spark a high-street bonanza, or interest rates could come down faster than forecast. What the chancellor must fear is the prospect of neither happening in a meaningful way.

What if Trump’s antics mean consumers remain nervous about spending, especially on big-ticket items like furniture, house renovations and cars? And what if the Bank keeps interest rates high in a pre-emptive strike to prevent a repeat of the pandemic-related spike in import costs?

Trump is a headache that paracetamol cannot cure.

The hope for consumers and business alike – those that need to borrow money – is that the Bank recognises that Trump or no Trump, the UK has fundamental problems that will be eased by cheaper credit.