* Fed hikes 25 bps but confounds hawks with cautious outlook
* Sterling jumps after BoE rate-setter votes for hike
* Dollar steadies after hitting one-month low
* Euro gets added lift as Dutch election soothes EU breakup fears
* Stock markets, commodities rally as risk aversion ebbs
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jemima Kelly
LONDON, March 16 (Reuters) - World stock indexes surged to all-time highs on Thursday while the dollar hit a one-month low, building on moves that followed the Federal Reserve's interest rate hike and signal there would be no pick-up in the pace of tightening.
Markets also welcomed Dutch centre-right Prime Minister Mark Rutte's fighting off a challenge by anti-immigration, anti-European Union rival Geert Wilders to score an election win seen as a victory against populist nationalism.
The election result, along with the Fed statement, handed the euro its biggest one-day jump in nine months on Wednesday, with the single currency climbing above $1.07 for the first time since early February and staying above that level on Thursday, at $1.0729.
The MSCI world equity index, which tracks shares in 46 countries, jumped 0.7 percent on the day to reach an all-time high after the Fed lifted its funds rate by 25 basis points, but said further increases would only be "gradual".
Wall Street futures pointed to a stronger open, building on Wednesday's Fed-led rally.
Yields on 10-year U.S. Treasuries edged up, having suffered their heaviest falls since last August, while the dollar index -- which measures the greenback against six major peers -- was down 0.3 percent at its weakest since mid-February.
"The bar was high for the FOMC (Federal Open Market Committee) to deliver a hawkish surprise, and one could argue that asset prices, in particular bond yields and the dollar, had been reflecting overshot tightening expectations going into this meeting," said ING currency strategist Viraj Patel, in London.
While the Fed surprised markets by being more dovish than expected, the Bank of England went the other way, sending sterling to a two-week high of $1.2364 after minutes showed one of nine rate-setters had voted for an interest rate hike, while others felt it would not take much to follow suit.
"After all the talk of a hawkish surprise from the Fed, it was the Bank of England that took markets by off guard," said ETX Capital market analyst Neil Wilson, in London.
Across emerging markets, where investors had been concerned about faster U.S. hikes and more political upheaval in Europe, MSCI's sector equity index jumped over 2 percent -- the biggest daily gain for a year.
Earlier, MSCI's broadest index of Asia-Pacific shares outside Japan jumped 1.2 percent to its highest level since mid-2015.
European shares also rallied, with the pan-European STOXX 600 index climbing 0.7 percent to its highest level since December 2015 on relief over the Fed's cautious tone, as well as the Dutch election result.
That helped Amsterdam's AEX stock index climb to its highest level in more than nine years, while both Germany's DAX and France's CAC 40 hit their highest levels since mid-2015 as fears eased that the euro zone was heading inexorably towards a break-up.
"Some of that fear around Brexit, Trump, and then Wilders and Le Pen, may now be seeping out of the markets - you see some of that fear dissipating," said Arne Petimezas, analyst at AFS Group in Amsterdam, referring to far-right French presidential Marine Le Pen.
Commodities rallied on the weaker dollar, with spot gold hitting a ten-day high of $1,228.81 an ounce, after enjoying its biggest daily jump since September.
U.S. crude futures rose 37 cents to $49.23 per barrel, adding to a 2.4 percent gain on Wednesday. Brent firmed 38 cents to $52.19, after rising more than a dollar overnight.
For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets (Additional reporting by Wayne Cole in Sydney, and Abhinav Ramnarayan and Helen Reid in London)