*

TSX ends down 0.7% at 22,199.13

*

Posts its biggest decline since Feb. 13

*

BoC leaves benchmark rate on hold at 5%

*

Financials lose 1.6%

(Updates to market close)

By Purvi Agarwal and Fergal Smith

April 10 (Reuters) - Canada's main stock index fell by

the most in nearly two months on Wednesday as the Bank of Canada

left its policy rate on hold and news of hotter-than-expected

U.S. inflation prompted investors to scale back expectations for

interest rate cuts.

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

ended down 162.65 points, or 0.7%, at 22,199.13, its

biggest decline since Feb. 13.

"Markets are nervous" because there will not be as many

interest rate cuts this year as previously thought, said Greg

Taylor, chief investment officer at Purpose Investments.

U.S. stocks tumbled and bond yields jumped after U.S.

consumer prices rose more than expected in March, throwing cold

water on hopes the Federal Reserve would enter its monetary

policy easing phase soon.

The Bank of Canada kept its key interest rate unchanged at a

near 23-year high of 5% but said a cut in June was possible if a

recent cooling trend in inflation continues.

The Canadian central bank is taking another step towards

cutting rates but needs to see more evidence that the move lower

in inflation will be sustained, said Andrew Kelvin, chief Canada

strategist at TD Securities.

Financials, the most heavily weighted sector on the Toronto

market, fell 1.6% and technology was down 1.7%.

Nine of the TSX's 10 main sectors lost ground. The exception

was energy which notched a gain of 1.8% as the price of oil

settled 1.2% higher at $86.21 a barrel.