We investigate the use of inexact solves for interpolatory model reduction and consider associated perturbation effects on the underlying model reduction problem. We give bounds on system perturbations induced by inexact solves and relate this to termination criteria for iterative solution methods. We show that when a Petrov-Galerkin framework is employed for the in-exact solves, the associated reduced order model is an exact interpolatory model for a nearby full-order system; thus demonstrating backward stability. We also give evidence that for Η₂-optimal interpolation points, interpolatory model reduction is robust with respect to perturbations due to inexact solves. Finally, we demonstrate the effectiveness of direct use of inexact solves in optimal Η₂ approximation. The result is an effective model reduction strategy that is applicable in realistically large-scale settings.