TORONTO -- North American stock markets rallied Monday after a U.S. Federal Reserve official hinted that the central bank remains cautious about interest rate hikes.

Fed governor Lael Brainard reassured investors after she said in a speech that the risk with raising rates too soon was that it could damage the fragile economy by igniting inflation.

Economic weakness "counsels prudence," she said in the last public comments from the Fed until the central bank meets on Sept. 20-21.

In Toronto, the S&P/TSX composite index climbed 57.14 points to 14,597.14, while in New York, the Dow Jones industrial average surged 239.62 points at 18,325.07. The broader S&P 500 index was up 31.23 points at 2,159.04 and the Nasdaq composite added 85.98 points at 5,211.89.

Major Canadian and U.S. stock markets plunged on Friday after Fed Bank of Boston president Eric Rosengren said there was a case to be made for the Fed to raise rates sooner rather than later, giving rise to the idea there is still a possibility that the bank may hike at its meeting next week.

Canadian markets strategist Craig Fehr said Monday's rebalancing signals that there is still a lot of speculation about what the Fed is set to do about monetary policy.

"The last two days have shown us that the markets are still hanging on every word from central banks," said Fehr, who is with Edward Jones in St. Louis.

"We continue to see equity markets that are being whipped back and forth on any speculation of what central banks will or will not do in the short term."

He noted that Fed officials know their comments can send investors into a tizzy trying to predict their future actions.

"Fed officials are trying to be careful to be transparent where possible but not paint themselves into a corner," said Fehr.

"The data isn't suggesting exactly one call or the other because it's debatable. I suspect this commentary we've seen in recent days is indicative of the fact that there are debates going on within the central bank and differing views of what they should do. That's why it's a committee (making the decision)."

Commodities were mixed as the December gold contract fell US$8.90 to US$1,325.60, while the October crude oil contract gained 41 cents at $46.29 per barrel. The October contract for natural gas gained 12 cents at US$2.92 per mmBtu. The December copper contract was up a penny to US$2.10 a pound.

The Canadian dollar was barely changed, dipping 0.07 of a cent at 76.63 cents US.