Australian shares have rallied on Thursday, tracking overnight Wall Street gains after the US Federal Reserve chairman said the central bank could slow its pace of interest rate hikes "as soon as December".

Mr Powell's words appeared to soothe investors who were fearing a more hawkish statement even as Mr Powell warned the fight against inflation was far from over and that key questions remain unanswered, including how high rates will ultimately need to rise and for how long.

"The market is taking this glass-half-full, it could've been worse approach. Powell didn't really say anything that new," said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute in Charlotte, North Carolina.

"The path of least resistance since the last inflation number has been higher. There's momentum to the upside in place until something outright stops it," Mr Samana said.

"Policy continues to tighten. People are just not appreciating it," he added, noting that even if the Fed were to pause rate hikes it is still shrinking the balance sheet, which he sees as "almost as important if not more important than the level of rates."

The Dow Jones Industrial Average rose 737.24 points, or 2.18 per cent, to 34,589.77, the S&P 500 gained 122.48 points, or 3.09 per cent, to 4,080.11 and the Nasdaq Composite added 484.22 points, or 4.41 per cent, to 11,468.00.

ASX hits seven-month high

Back home, the ASX 200 closed up 70 points or 1 per cent to 7,354.

By 04:15pm AEDT, the Australian dollar was up 0.4 per cent to 68.12 US cents.

Most sectors finished the session higher, but academic, energy and healthcare sectors ended lower.

Ramelius and Block were the top performers, gaining 10.5 per cent and 7.4 per cent respectively.

Shares of Medibank rose 1.7 per cent after the private health insurer confirming that more stolen customer data has been released on the dark web, amid reports the hackers have released all files remaining in their possession.