World stock markets rose on Friday after a top Federal Reserve official said he would back a small interest rate hike at its next meeting and hinted at a possible summer pause to evaluate how tighter policy has cooled high inflation.

Talk has been swirling that the Fed could hike interest rates by percentage point at its next meeting this month. 

However, Atlanta Fed chief Raphael Bostic said he favoured a quarter-point move instead, denting the dollar.

"This seemed to placate markets somewhat after being on a relentless 'higher for longer' train for the last few days," said analyst Neil Wilson at trading group Finalto.

Bostic questioned whether rates should go much higher than 5.25 per cent from the current 4.5 to 4.75 per cent.

"I let the data guide me," Bostic said. "If the data continue to come in suggesting the economy is stronger than I had projected, I'll adjust my policy trajectory."

I let the data guide me. If the data continue to come in suggesting the economy is stronger than I had projected, I'll adjust my policy trajectory- Atlanta Fed chief Raphael Bostic

A strong run of data had sent chills through trading floors in February – wiping out almost all January's rally – as investors realised the US central bank had more work to do to control prices.

The unease largely overshadowed optimism about China's recovery after officials ended three years of strict zero-COVID containment measures that battered the world's number two economy.

Several Fed policymakers have lined up to insist that while consumer prices are coming down, they are determined to keep hiking rates until they hit their two per cent inflation target.

The latest indicators have led investors to bet on rates hitting a peak of 5.5 per cent, though six per cent has also been mooted.

Figures this week showed eurozone inflation stubbornly-high in February, leading European Central Bank chief Christine Lagarde to say more tightening was needed.