Yes. Increased cycles cost means a subnet burns more cycles with the same load, so it becomes easier for a subnet to burn more cycles than it “costs” in NP rewards and therefore reduce inflation / add to deflation. This is important for the overall tokenomics: The idea is that every somewhat loaded subnet adds to deflation and helps offset the NNS voting rewards. A lot more background and analysis is given in this great post by @bjoernek.
What does this refer to? I actually think that the node provider rewards are expected to go down when the Gen 1 NPs reach the 48 month mark (see this topic for more info) and performance-based node provider rewards (topic).