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(Bloomberg) -- US Treasuries rallied for a third day as Federal Reserve Chair Jerome Powell said the central bank will aim to prevent tariffs from leading to stickier inflation.

The five-year note led gains in the US government debt market on Wednesday, with yields down seven basis points to 3.9% as Powell said the central bank was “well positioned to wait for more clarity” on how President Donald Trump’s evolving trade policy impacts price pressures. The moves in yields accelerated as equities slumped more than 2%.

The “bond market is comforted by Powell’s sanguine outlook on funding conditions and reserve abundance, but the equity market is getting anxious as investors are looking for the Powell put — which is not there yet,” said Tracy Chen, a portfolio manager at Brandywine Global Investment Management. “There is no sense of urgency to act from Powell. He is in a wait-and-see mode given all the uncertainty in tariff standoff.”

The rally in bonds also followed a solid $13 billion sale of 20-year bonds, which was awarded at 4.81% compared with a 4.814% when-issued yield at the 1 p.m. New York time bidding deadline.

Earlier, data showed US retail sales rose substantially in March on a jump in car purchases and other goods such as electronics, suggesting consumers were scrambling to get ahead of tariffs.

In sharp contrast with the state of market a week ago, when Trump’s about-face on tariffs shook investors, futures volumes on Wednesday were well below recent levels. By about 3 p.m. New York time, Treasury contracts were running at about 60% of 20-day average, with SOFR futures at a similar level.

To Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities, the Treasury market is now trading more cleanly than it was earlier in the month as the risk of global tariffs raised threats to the economy, undermining Treasuries’ reputation as the world’s safest asset.

“Positions feel better balanced, so back to a risk-off” market, he said. Faranello favors five-year notes “if the Fed is going to be reactionary versus preemptive.”

Powell’s Message

Powell’s comments, delivered at the Economic Club of Chicago, were in sharp focus across Wall Street after a bout of volatility in the $29 trillion Treasury market.

The Fed chief acknowledged that tension was building between the central bank’s dual mandates of ensuring US growth while keeping inflation checked.

Still, he echoed Cleveland Fed President Beth Hammack, who’d pointed out that there’s good reason for officials to hold interest rates at current levels until there is more clarity on how tariffs and other policy changes will impact the economy.

Traders were pricing in about 90 basis points of easing by the end of the year, implying a minimum of three quarter-point reductions starting in July. At JPMorgan Chase & Co., economist Michael Feroli said that Powell’s comments were consistent with the bank’s view that the first cut of the year will actually come in September.

Powell said that despite recent volatility, the market was functioning, so there wasn’t a need for the Fed to step in now. The remark jolted US equity markets, and helped fuel a further advance in bonds.

The dollar, meanwhile, held tight to its losses — bringing its year-to-date decline to 6.4%, according to a Bloomberg gauge.

He also said the Fed’s recent decision to slow the pace of its balance-sheet runoff — known as quantitative tightening — and the fact that reserves remain abundant mean the central bank can continue QT longer.

--With assistance from James Hirai.

(Updates prices, adds comments throughout.)