LAS VEGAS — Even with an optimistic short-term outlook, there are many reasons to be cautious about returning to a robust economy in the medium or longer term, according to William Emmons, chief economist with the Federal Reserve Bank of St. Louis.

Speaking at the ACUMA conference at The Cosmopolitan in Las Vegas on Monday, Emmons outlined an argument he said was fermenting at the Federal Reserve.

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Chairman Ben Bernanke and other Federal Reserve executives believe the economy will eventually return to levels seen in the middle of the past decade before the Great Recession, Emmons explained, while other Federal Reserve executives argue that the economy in 2005-2007 was overheated by the credit and housing bubbles and should not set a standard for future economic growth.

The argument matters, Emmons said, because if Bernanke is correct the measures the Federal Reserve has taken can only help restore the economy, albeit slowly. But if the other Federal Reserve executives are correct, the Fed's most recent efforts to stimulate more economic growth could turn out to be significantly inflationary.

Emmons also pointed to shifting demographic and housing finance trends which, he said, may end up bringing the nation a housing economy going forward that “feels a lot like the one we have now, bouncing on the bottom and growing by fits and starts.”

In particular, Emmons mustered data to show that housing prices historically track income and wages and are unlikely to spike much higher than wages or income for very long.

“A market's housing prices might spike in a given area for a given period of time, but they always come back to income,” he said.

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