The Reserve Bank of Australia (RBA) hinted on Friday it is likely to hold the cash rate at 4.75 percent for the rest of the year.

Appearing before the House of Representative Standing Committee on Economics, RBA governor Glenn Stevens said the monetary policy is appropriate for the near term.

"For the period in which we're going to in the near term, I think this is about the right level. At the moment most commentators and market pricing does not anticipate any further near-term tightening by us for quite some time. And I think that's probably a reasonable position for them to have based on the information we have now."

"Overall, and also taking account of the exchange rate, which has risen substantially this year, we judge this to be the appropriate setting for the period ahead."

However, Mr Stevens also suggested the RBA was not done tightening yet.

"Over the coming year, we think that inflation will be pretty close to where it is now, consistent with the target. But looking further ahead, in an economy with reasonably modest amounts of spare capacity, the terms of trade near an all-time high and the likely need to accommodate the largest resource-sector investment expansion in a century, it is pretty clear that the medium-term risks on inflation lie in the direction of it being too high, rather than too low," he said.

According to him, market forecasts of a rate rise in February 2011 were realistic.

The RBA raised its official cash rate by 25 basis points early this month, with many commercial lenders raising their loan rates by even more.

Commonwealth Bank raised its rate by 45 basis points, ANZ by 39, NAB by 43 and Westpac by 35 points.

With Reuters