Republicans, who want an excuse to vote against infrastructure outlays, are hoping to spook Biden and the Fed with talk of Bidenflation. But judging by his testimony today to the House Financial Services Committee, Fed Chair Jerome Powell, nobody’s idea of a free-spending liberal, isn’t buying it.

He and the central bank’s Open Market Committee will continue the Fed’s policy of low interest rates. The short-term jump in prices, reflected in a 5.4 percent increase in the June Consumer Price Index relative to June 2020, Powell testified, is the result of one-time supply bottlenecks as the economy reopens, and the fact that prices are rebounding from a depressed level in 2020 during the pandemic.

It’s also true that as labor markets have tightened, wages in some sectors have increased, increasing labor costs, but that’s good news. In fact, average wages have been increasing more slowly than prices. As Powell testified, he expects the medium-term inflation rate to be well within the Fed’s own target of 2 percent.

Biden has broken with neoliberal orthodoxy in one area after another. An important one is not being stampeded into pulling back from a needed recovery program because some fiscal scolds panic at the first sign of inflation.

This morning, Politico opined that because of the higher Consumer Price Index figure for June, maybe Larry Summers’s inflation worries were right all along.

Bloomberg reported that National Economic Council chief Brian Deese and Council of Economic Advisers chair Cici Rouse invited Summers in for a courtesy chat yesterday. The subject was reportedly infrastructure. As in, "Larry, we are having enough trouble with the Republicans, so maybe you could stop attacking the program as too big?"

Not likely. At least Summers’s public attacks minimize the risk that he will have any influence inside.

Meanwhile, Powell is eager for Biden to reappoint him as chair. His term expires early next year. As a Republican, he partly bulletproofs Biden against the charge of being soft on inflation, and serves as an administration olive branch to Republicans in Congress.

But Powell has been dismal on the Fed’s other job—financial regulation. My sources say the decision hasn’t been made yet, but Biden is likely to name a new Fed chair.