Parry's comments hint that the Fed still views the neutral level of the federal-funds rate to be approximately two percentage points above the inflation rate,

There is no operating manual that says what a neutral fed funds rate is, but the Fed knows that it's higher than 3 percent,

'Watch for [Fed members'] comments this week; they'll say, 'It's just one month,' ... They tend to look at the cumulative evidence on certain issues before passing any meaningful judgment with policy significance. They need much more than this.

At the margin they reinforced our growing sense that Fed tightening might stop before the federal funds rate reaches the 5 percent level we are currently forecasting.

His testimony is apt to be consistent with the notion that the Fed is still in a tightening mode and inflation is rearing its head,

The Fed certainly recognizes the importance that the markets are placing on the housing market and could well use it as a means of sending strong signals.