Mexico energy inflation containment and interest rate levels, Digi Mart USA News (Mexico): Global fund manager Franklin Templeton says federal fiscal incentives on gasoline and diesel have allowed Mexico’s central bank to hold its benchmark rate at current levels and maintain a less restrictive tone among market participants. The fund manager noted that while the annual change in energy prices in Mexico is close to zero, prices in the United States have risen by roughly 20%.
According to the report, Mexican fiscal incentives on gasoline and diesel have absorbed part of the external pressure stemming from the war in Iran, keeping the annual change in these energy prices at nearly zero. By comparison, energy prices in the United States have increased by around 20%.
Ramsé Gutiérrez, vice president and co-director of Franklin Templeton in Mexico, said the Banco de México (Banxico) has been able to capitalize on the measure by being less restrictive and lowering its rates. As a result, the government’s action has eased inflation pressure on consumers and given the central bank more room to avoid additional monetary tightening.
So far in 2026, contrary to the global trend of raising or maintaining benchmark rates in response to geopolitical conflicts, Banxico has cut its interest rate three times. The latest cut, on November 5, lowered the benchmark rate to 6.25% from 7% in February.
Several analysts have noted that since March 2024, when Banxico began its easing cycle, the benchmark rate has fallen by 475 basis points.
By contrast, at the end of October the U.S. Federal Reserve decided to hold its rate in a range of 3.75% to 4%, with a divided vote in which one proposal called for raising it to 4% to 4.25%.
The market expects that move to take place in December, with two additional 25-basis-point increases during 2027.
Gutiérrez said Mexican government energy subsidies introduced in 2022 in response to the war in Ukraine peaked in the early months and declined significantly toward the end of that year. In 2026, subsidies linked to the conflict between the United States and Iran began in March and reached their highest levels only between September and October, with the pressure now focused on diesel.
Global shortages of refined products, linked to supply disruptions from the Middle East and Russia, have kept diesel prices elevated, which explains why Mexico’s largest fiscal effort is concentrated on that fuel.
Gutiérrez noted that the Ministry of Finance (Hacienda) has absorbed part of the adjustment that would otherwise fall on consumer prices. Without this measure, he said, a more restrictive stance from Banxico could also have been required.
If diesel shortages persist, he added, the next question is how long the Mexican government can sustain high subsidies without weakening its fiscal margin.
