Europe's banks warned on Monday that an increase in prices as a result of the introduction of euro notes and coins could push up eurozone inflation by up to 1 percentage point. However a forecast by the Banking Federation of the European Union also noted that the logistical effort involved in the changeover to the new currency might boost economic growth by a similar amount.

In what it said was a possibility "which should not be underestimated", the federation, which represents 2,900 banks in the EU and beyond, forecast that price increases could add 0.4 to 1 percentage points to inflation as the introduction of euro notes and coins proceeds in coming months.

The federation's view reflects concerns that prices will be rounded up rather than down when converted into euros, and that price increases are already taking place.

"It's clear that for tradeable goods there won't be these effects because transparency is so high," said Martin Hufner, chairman of the federation's economic and monetary affairs committee. "But on the retail and services side, you might find that due to lower margins there is not just a transfer of national prices to the euro price."

Wim Duisenburg, president of the European Central Bank, has argued that prices in euros will be rounded down as well as up, and as a result he is not expecting a significant effect on inflation. But a recent study by the European Commission showed that 64 per cent of euro-zone citizens expected prices to rise.

The banks federation warned against "complacency" against such an inflationary risk, arguing that monetary, economic and wage policies needed to make sure that higher prices were not reflected in higher wage demands.

It also said the changeover could boost growth by between 0.1 per cent to 0.3 per cent a quarter from the third quarter this year until the first quarter of 2002, giving a total possible rise of about 1 per cent.

This would be due to the demand created by the distribution and protection of the notes and coins, as well as investments in new automatic teller machines. The federation also said some consumers were bringing their purchases forward so that they did not have to use the new currency.

Overall, the federation estimated that growth would be 2.4 per cent this year - down from its previous forecast of 3 per cent - and 2.7 per cent in 2002. It estimated that inflation would be 2.3 per cent this year.