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TSX ends down 1.7% at 29,888.82

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Inflation rate increases to 2.4% in September

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BoC rate cut chances edge lower

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Materials group drops 8.2% as gold slides

(Updates at market close)

By Fergal Smith

TORONTO, Oct 21 (Reuters) - Canada's main stock index

posted its biggest decline since April on Tuesday as gold prices

pulled back sharply and hotter-than-expected inflation data

reduced bets on a Bank of Canada interest rate cut.

The S&P/TSX composite index ended down 527.62

points, or 1.7%, at 29,888.82, its lowest closing level since

October 10. Still, the index has advanced 20.9% since the start

of the year.

Canada's annual inflation rate increased to 2.4% in

September, eclipsing the 2.3% pace that analysts expected and up

from 1.9% in August.

"Certainly the inflation number, higher than expected, is

definitely driving part of that (decline in stocks) because it

lowers the probability of an interest rate cut." said Lorne

Steinberg, president, Lorne Steinberg Wealth Management Inc.

Chances of a Bank of Canada interest rate cut at an October

29 policy decision dipped to 80% from 86% before the inflation

report, swap market data showed. Last month, the central bank

lowered its benchmark rate to a three-year low of 2.50%

"Part of it just feels like a bit of a pullback from an

absolutely spectacular run ... Of course, the price of gold is

down so the gold stocks are getting hammered today," Steinberg

said.

Gold fell 5.5% as investors booked profits.

Expectations of U.S. interest rate cuts and sustained safe-haven

demand drove the metal to a record high in the previous session.

The materials group, which includes metal mining

shares, fell 8.2%, with shares of Lundin Gold ( LUGDF ) down

14.8%.

Technology lost 1.3%, weighed by declines for electronic

equipment firm Celestica ( CLS ) and e-commerce company Shopify ( SHOP )

.

A months-long fight for control of Canada's last pure-play oil

sands company took a fresh twist as MEG Energy MEG.TO postponed

a scheduled meeting at which shareholders were set to vote on

its proposed takeover by Cenovus Energy CVE.TO.

Shares of MEG lost 1% and Cenovus ended 2.1% lower.