GLOBAL MARKETS-Equities, dollar rise as Fed officials downplay inflation concerns

(Recasts with U.S. markets)

* Dollar index turns up for first time this week

* Major U.S. stock indexes make gains

* Oil prices, gold move higher

NEW YORK, May 26 (Reuters) - Global equity markets gained and the U.S. dollar rallied against major currencies on Wednesday for the first time this week as Federal Reserve officials continued to downplay the prospects of rising inflation.

Richard Clarida, the Fed’s vice chair, said on Tuesday that the U.S. central bank had the ability to curb an outbreak of inflation and engineer a “soft landing” without throwing the country’s economic recovery off track.

Clarida’s comments came a day after Fed Board Governor Lael Brainard and James Bullard, president of the St. Louis Federal Reserve, reiterated the Fed’s current dovish monetary policy stance and expectation that any price spikes would recede over time.

The dollar index was up 0.34% in early afternoon trading, while the benchmark yields on 10-year U.S. Treasuries slipped to 1.557%, from 1.564% late on Tuesday.

“The Fed has really been pushing its view on inflation, but with regards to bond tapering investors are concerned they will allow the economy run hot,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.

MSCI’s broadest index of world stocks was up 0.22% at 708.79. European stocks were flat below a record peak set on Tuesday.

Clarida’s comments reflect a shifting tone at the Fed. A month ago, Fed Chair Jerome Powell said it was “not yet” time to contemplate discussion of policy tapering or slowing the pace of its asset purchases. But more recently policymakers have acknowledged they are closer to debating when to pull back some of their crisis support for the U.S. economy.

On Wall Street, all three main indexes were making gains driven by consumer discretionary, communication services and financial sectors.

In early afternoon trading, the Dow Jones Industrial Average rose 0.21%, to 34,383.38, the S&P 500 gained 0.29%, to 4,200.34 and the Nasdaq Composite added 0.62%, to 13,741.98.

“The Fed is still putting a lot of liquidity into the system and when the economy is running hot that’s got a lot of people thinking that they might make a policy mistake,” Ripley said.

Overnight in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.45% to over two-week highs, while Tokyo’s Nikkei advanced 0.3%.

Emerging markets stocks strengthened as the stronger economic growth numbers in Mexico lifted the peso, boosting hopes that the country is on track to recover from its sharpest economic contraction since the 1930s.

MSCI’s index of emerging market stocks rose 0.49%.

Gold prices firmed above the key $1,900 per ounce level on Wednesday, helped by weaker U.S. Treasury yields and the Fed’s moves to douse inflation worries.

Spot gold was 0.2% higher at $1,902.26 per ounce in early afternoon after hitting its highest since Jan. 8 at $1,912.50.

Oil prices fell on Wednesday as worries that a possible return of Iranian supply would cause a glut outweighed expectations of improving U.S. fuel demand that were reinforced by a drop in weekly inventory estimates.

Brent was up 11 cents, or 0.15%, to $6855 a barrel, while the U.S. West Texas Intermediate (WTI) crude was down 25 cents or 0.35% at $65.85 a barrel.

Reporting by Chibuike Oguh in New York; Editing by Will Dunham