Yes loopback is excluded here, it would have more to do with issues like “when I record guitar it also records the click track / metronome”. (see here lol)
The OP’s problem is that they are hearing the monitored signal from two sources at the same time : one from the track’s monitor button, and one from the hardware monitoring, which causes a slight delay/flanger effect because the return from Cubase has latency and the hardware monitoring has none.