The Reserve Bank will continue to lift its key cash rate as long as “economic conditions evolved as expected”, the minutes for the Melbourne Cup Day board meeting reveal.

The minutes were released this morning are a bit more explicit on the future direction of rates than the post November 3 meeting statement, or the November 6 release of the 4th Statement on Monetary Policy for 2009.

In fact, reading the latest RBA minutes you get the clear impression that for as long as the data flow on the economy is solid and upbeat, the likelihood will be for a rate rise to occur.

The minutes were released as the Australian dollar traded at 15-month highs after the US currency weakened as Fed chairman Ben Bernanke again emphasised that he saw the US economy growing very slowly next year as it pushed into the headwinds of weak credit and high unemployment.

But it’s a very different story in Australia where, from the RBA’s perspective, all that remains open to question is the pace or timing of interest rate rises in coming months.

“Looking ahead, members expected that if economic conditions evolved as expected, further gradual adjustment in the cash rate would most likely be appropriate over time, though the pace of the adjustment remained an open question,” the minutes concluded.

Overall, members considered that the recent information was consistent with the conclusions reached by the board a month earlier: namely, conditions in the global and Australian economies were significantly better than had been expected earlier in the year when the board had lowered the cash rate to 3%; the Australian economy was operating with less spare capacity than earlier thought likely; and the growth outlook for the next few years had improved.

The board therefore concluded that it remained prudent, over time, gradually to reduce the degree of monetary accommodation.

In considering the pace of that adjustment, members were conscious of balancing risks.

On the one hand, business and consumer confidence could prove fragile, and economic activity at home and abroad might slow more than expected as the effects of stimulus measures faded. Also, the rise in the exchange rate would constrain output and dampen inflationary pressure, and credit conditions for some borrowers remained quite difficult.

On the other hand, a lengthy period with interest rates at a very low level carried its own risks, particularly once the threat of serious economic weakness had passed.

The improvement in the “growth outlook for the next few years” was backed up in the November 6 SMP with significant upgrades to the RBA’s growth forecasts into 2011.

Since the November 3 meeting we have seen solid figures on building approvals, weak retail sales figures and a stronger-than-expected labour force report for October, although there were more part-time work expected, while full-time job growth was down on the strong September figures.

But September/October saw a total of 65,000 full-time and part-time jobs created, which is a stronger outcome than what we saw in the still-depressed US economy in those two months (Job losses of well over 300,000).

The latest RBA minutes contrast very favourably with the latest comments from Bernanke on the US economy overnight.

In that speech he had this to say about the US: “Financial conditions are considerably better than they were, but significant economic challenges remain. The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible.

“How the economy will evolve in 2010 and beyond is less certain … My own view is that the recent pick-up reflects more than purely temporary factors and that continued growth next year is likely. However, some important headwinds — in particular, constrained bank lending and a weak job market — likely will prevent the expansion from being as robust as we would hope.”

That is a long way from the confidence at the RBA, as expressed in the latest minutes: that “the growth outlook for the next few years had improved”.