Code change:
/** * Inline hints */ <del> export const editorInlayHintForeground = registerColor('editorInlayHint.foreground', { dark: transparent(badgeForeground, .8), light: transparent(badgeForeground, .8), hcDark: badgeForeground, hcLight: badgeForeground }, nls.localize('editorInlayHintForeground', 'Foreground color of inline hints')); export const editorInlayHintBackground = registerColor('editorInlayHint.background', { dark: transparent(badgeBackground, .6), light: transparent(badgeBackground, .3), hcDark: badgeBackground, hcLight: badgeBackground }, nls.localize('editorInlayHintBackground', 'Background color of inline hints')); </del> <ins> export const editorInlayHintForeground = registerColor('editorInlayHint.foreground', { dark: badgeForeground, light: badgeForeground, hcDark: Color.black, hcLight: badgeForeground }, nls.localize('editorInlayHintForeground', 'Foreground color of inline hints')); export const editorInlayHintBackground = registerColor('editorInlayHint.background', { dark: transparent(badgeBackground, .8), light: transparent(badgeBackground, .6), hcDark: '#f38518', hcLight: badgeBackground }, nls.localize('editorInlayHintBackground', 'Background color of inline hints')); </ins> export const editorInlayHintTypeForeground = registerColor('editorInlayHint.typeForeground', { dark: editorInlayHintForeground, light: editorInlayHintForeground, hcDark: editorInlayHintForeground, hcLight: editorInlayHintForeground }, nls.localize('editorInlayHintForegroundTypes', 'Foreground color of inline hints for types')); export const editorInlayHintTypeBackground = registerColor('editorInlayHint.typeBackground', { dark: editorInlayHintBackground, light: editorInlayHintBackground, hcDark: editorInlayHintBackground, hcLight: editorInlayHintBackground }, nls.localize('editorInlayHintBackgroundTypes', 'Background color of inline hints for types')); export const editorInlayHintParameterForeground = registerColor('editorInlayHint.parameterForeground', { dark: editorInlayHintForeground, light: editorInlayHintForeground, hcDark: editorInlayHintForeground, hcLight: editorInlayHintForeground }, nls.localize('editorInlayHintForegroundParameter', 'Foreground color of inline hints for parameters'));

Related discussion:
text: We have received feedback that inlay hints blend in with the code too much. We aren't eager to tackle that with changing font sizes because that can "harm" readability. Instead we should tweak the colors, esp for our default themes
Looking at a combination of slight color changes and some minor padding/border radius tweaks to make them look like a visibly different element and less like highlighted regular code. An example for dark+: <img width="337" alt="CleanShot 2022-07-22 at 13 45 31 src="https://user-"And for light+: <img width="280" alt="CleanShot 2022-07-22 at 13 48 40 src="https://user-"
Adding to the list to make sure we look at the current line highlight color in relation to the inlay hints: !
Did you push these changes or are these changes anywhere to be applied for August? Otherwise I'll move this to September
Moved to September—I have the draft PR but I didn't consider the compact settings yet.
ping
Made changes to all four base theme types. The most noticeable changes will be in the high contrast and light themes. The dark had decent contrast already but I tweaked it a bit. Let me know what you think.