It creates new Hive in the virtual supply. The initial inflation expected this, it started at 10% interest in 2016.
Whether or not it actually creates inflation depends on how it affects HBD conversion - which is by far the largest source of excess inflation in Hive. If it reduces HBD conversion at low Hive prices it may actually reduce inflation overall.
https://hive.blog/hive/@demotruk/inflation-in-hive-and-steem-why-it-is-higher-than-people-say-it-is
It also reduces inflation if it contributes to a long term increase in the HIVE price. HBD and conversions increase inflation when HIVE is declining in price (a situation all too common with Steem and Hive over the past five years) and decrease inflation when HIVE is increasing in price.
Of course this is all somewhat circular.