* TSX ends down 0.3% at 33,741.24

* Annual inflation rate rises to 2.8% in April

* Materials group falls 3.9% as gold prices decline

* Energy adds 2.3% even as oil settles 0.8% lower

(Updates at market close)

By Fergal Smith

May 19 (Reuters) - Canada's main stock index fell to a

two-week low on Tuesday as worries about the inflationary impact

of higher oil prices boosted long-term borrowing costs, with

gold mining and consumer discretionary shares among the biggest

decliners.

The Toronto Stock Exchange's S&P/TSX composite index

ended down 92.11 points, or 0.3%, at 33,741.24, marking its

lowest closing level since May 5.

Wall Street's main indexes posted steeper losses as the

benchmark 10-year Treasury yield climbed to its highest level in

more than a year.

"The fact that oil remains expensive I think is a main

factor and the inflationary expectations of people are going

higher," said Michael Sprung, president at Treegrove Investment

Management.

"We almost have a situation where the global developed

economies are somewhat diverging from the financial markets

because the financial markets overall have been hanging in

pretty well at fairly rich valuations."

Canada's consumer price index increased at an annual rate of

2.8% in April, up from 2.4% in March, driven largely by a surge

in gasoline prices after the Iran war pushed global oil prices

sharply higher.

Underlying price pressures slowed, however, which helped

cool bets on Bank of Canada interest rate hikes.

The materials group, which includes metal mining

shares, fell 3.9% as gold and copper prices

declined.

Barrick Mining ( B ) has increased Ebola precautions at

its Kibali gold mine in eastern Democratic Republic of Congo, a

spokesperson told Reuters. The gold miner's shares were down

2.8%.

The consumer discretionary sector lost 1.3%, with

shares of clothing retailer Aritzia Inc ( ATZAF ) ending 3.8%

lower.

Gains for energy capped the TSX's losses, with the

sector adding 2.3%. Oil settled down 0.8% at $107.77 a

barrel but remained near the top of its range this month.