(Updated at 1413 GMT)

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TSX up 0.3%

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Canada's inflation cools to 3-year low

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Materials lead gains on higher metal prices

By Khushi Singh

May 21 (Reuters) - Canada's main stock index edged higher on Tuesday as

the country's annual inflation rate touched a three-year low fueling bets for a

June interest rate cut, while a sell-off in healthcare shares kept the gains in

check.

At 10:13 a.m. ET (14:13 GMT), the Toronto Stock Exchange's S&P/TSX composite

index was up 75.12 points, or 0.33%, at 22,540.49.

Canada's annual inflation rate slowed to 2.7% in April, and core measures

continued to ease, bringing it closer to the Bank of Canada's 2% target.

"There is no longer any question about the trajectory, and the Bank of

Canada is out of excuses to dither and wait for further confirmation to cut at

the June meeting," said Kyle Chapman, FX markets analyst at Ballinger Group.

Money markets have now increased their bets for a rate cut on June 5 to

almost a coin toss from 39% before the data came out.

Rate-sensitive information technology shares climbed 0.3%.

The materials sector led sectoral gains on the back of rising

prices of most metals, adding 1.2%.

The healthcare index led the sectoral sell-off with a 1.5% drop.

The energy shares gained 0.6% despite a more than $1 drop in oil

prices over depressing consumer and industrial demand amid expectations of

higher-for-longer U.S. interest rates.

The Canadian dollar weakened against the greenback to 1.365,

following the softer inflation print, while the yield on benchmark

government debt also slipped by 5.7 basis points to 4.174%.

On the individual stock front, automation solutions provider ATS Corporation ( ATS )

was among the top losers on the benchmark index, losing 2.1% after RBC

reduced its price target to C$60 from C$65.