Inflation can have a direct effect on the XLM price by influencing investor sentiment and market liquidity. When traditional fiat currencies experience high inflation, people often look for alternative assets like cryptocurrencies to preserve their purchasing power. This can drive demand for XLM, pushing its price higher.

Conversely, if inflation rates remain stable and central banks maintain economic confidence, the demand for digital assets like XLM may fluctuate. Additionally, Stellar originally had an inflation mechanism where new XLM tokens were added annually, but this feature was removed in 2019 to maintain scarcity and prevent dilution.

Understanding how inflation interacts with copyright markets can help investors make informed decisions when analyzing the XLM price and its potential growth.