'Global economy faces its most difficult test'

FRANKFURT, Sept 9 (Reuters) The global economy faces its most difficult test in many years with economic growth slowing sharply even as high commodity prices put pressure on inflation, a senior International Monetary Fund (IMF) official said Tuesday.brIMF first deputy managing director John Lipksy said strains on financial markets remained significant more than a year after wider tensions from problems in US mortgage markets surfaced, constraining growth and banks' balance sheets.brCommodity prices remained high and volatile, bringing risks of knock-on inflation effects, but recent sharp falls in oil prices should ease short-term inflation pressures in advanced economies.brCentral banks in advanced economies could afford to keep rates on hold and, in regions with high real rates, look out for easing price pressures which would allow them to loosen policy down the track, he said.brAgainst the backdrop of protracted financial strains and dramatic surges in commodity prices, the global economy is confronted with its most difficult set of circumstances in many years, Lipsky said in remarks prepared for delivery to a conference organised by Germany's Die Zeit newspaper.brAdvanced economies, in general, face a spell of growth well below potential, as they grapple with ongoing strains from the financial crisis that began a year ago, as well as high oil prices and weaker external demand.brInflation was at its highest since the late 1990s, and recent falls in commodity prices would offer only limited respite as past increases were still in the pipeline.brLipsky said the IMF saw global growth slowing from 5 per cent in 2007 to about 3 per cent late in 2008, reaccelerating toward 4 per cent in the course of 2009, although he said the specific figures were still under review and would be released in the World Economic Outlook next month.