On January 25th the Central Bank of Nigeria (CBN) raised its benchmark interest rate to 6.5% from 6.25% as part of measures to tighten liquidity and rein in inflation. In addition to the 25-point increase in the monetary policy rate (MPR) the CBN's monetary policy committee (MPC) decided to raise the cash reserve requirement ratio for banks to 2% from 1% with effect from February 1st, and to increase the liquidity ratio to 30% from 25% with effect from March 1st. Recent data indicates that the year-on-year headline inflation rate fell to 11.7% in December from 12.8% in November, but has stayed stubbornly above the government's target of a single-digit rate since May 2008. The committee saw the risk of higher inflation in the coming months, with upward pressure from the likely increase in government spending in the run-up to the April elections and the purchases of banks' bad loans by the newly created Asset Management Corporation of Nigeria (AMCON; January 2011, Economic policy). The MPC said that getting to grips with inflation requires steps to address both supply and demand factors that drive inflation in Nigeria, including implementing outstanding structural reforms. It suggested that aggregate demand could be kept in check by restraining debt-financed government spending in the medium-term. Furthermore, government finance could be enhanced by removing unsustainable petroleum subsidies and cutting some other forms of recurrent expenditure.