* RBA says monetary policy appropriate for now
* RBA head: any further tightening gradual, spaced apart
* Markets push out risk of rate hike, Aussie dollar sags (Adds graphic)
By Ian Chua
SYDNEY, Nov 26 (Reuters) - Australia's central bank chief signalled on Friday that interest rates will remain steady for the next few months, leading markets to push out the timing of any tightening to mid-2011 and knocking the Australian dollar lower.
Still, Reserve Bank of Australia (RBA) Governor Glenn Stevens warned inflation risks over the medium term were on the high side, suggesting it was not done tightening policy.
The central bank lifted its official cash rate by 25 basis points to 4.75 percent earlier this month , and noted many commercial lenders had raised their loan rates by even more, leaving the overall policy setting "a little tighter than average".
"For the period in which we're going to in the near term, I think this is about the right level," Stevens told a parliamentary committee.
"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."
Interbank futures <0#YIB:> out to May rallied as the market pushed out the chances of a rate hike, while the Australian dollar shed about half a cent to $0.9743 , further away from its 28-year high of around $1.0182 set early this month.
Stevens said it was reasonable not to expect a rate hike imminently.
Markets are giving virtually no chance of a rate rise at the next policy meeting on Dec. 7, and assume just 32 basis points worth of tightening over the next 12 months < CSRBA1Y=CSAU>.
"We think they won't move till quarter one next year at the earliest," said John Peters, senior economist at Commonwealth Bank.
INFLATION
Stevens reiterated the central bank expected economic growth to be a little over 3 percent in 2010 and then to accelerate to 3.5 percent in 2011 and 2012.
Inflation was likely to stay within the central bank's 2-3 percent target range over the coming year, he said, but little spare capacity in the economy and a likely record surge in resource investment meant pressure was building.
"It is pretty clear that the medium-term risks on inflation lie in the direction of it being too high, rather than too low," Stevens said.
Stevens said he was also seeing signs that the private sector was picking up the economic slack as the effects of government stimulus faded.
"We may need some more (restraint) than we have at the moment at some point," he said. "But at this stage the expectations are for only fairly gradual, and not very close together, increases."
Voracious Asian demand for Australia's resources has led to huge price increases for iron ore and coal, causing a once-in-a-lifetime surge in the country's terms of trade, or the ratio of export to import prices.
In an effort to head off inflationary pressure, the RBA has lifted rates seven times in the past year by a total of 175 basis points.
Stevens, however, said key commodity prices were likely to ease off over the next few years. (Additional reporting by Wayne Cole, Koh Gui Qing, Rob Taylor and James Grubel; Editing by Mark Bendeich and Neil Fullick)