TORONTO (Reuters) - The Toronto Stock Exchange’s main index ended lower as investors dumped shares of financial institutions after the Bank of Canada held rates steady but cautioned that inflation has ticked higher than it expected.The S&P/TSX composite index closed down 38.64 points, or 0.3 percent, at 13,590.33.

“It appears to have everything to do with the Bank of Canada and their statement that inflation risks are still alive and well and living in Canada, so that’s hurting the financial shares,” said Patricia Croft, chief economist at Phillips, Hager & North.

“It’s the bank’s way of saying inflation is something they are watching very closely.

“It increases the odds of a further rate hike in Canada and that’s weighing on the financial sector today,” she added.

Six of the TSX index’s 10 main groups were lower, led by a 0.6 percent drop in the financials services group, which makes up more than 30 percent of the index’s total weight. The energy sector was unchanged.

Shares of financial institutions fell after the Bank of Canada held its key lending rate unchanged at 4.25 percent, as expected, but cautioned of stronger-than-expected inflationary and capacity pressures in the economy, which the market took as a signal of a greater risk of an interest rate increase.

Royal Bank of Canada sank 37 Canadian cents, or 0.6 percent, to C$58.90, while Toronto-Dominion Bank slumped 38 Canadian cents, or 0.6 percent, to C$68.19.

Weakness in the financial sector offset strong earnings from Petro-Canada , which rose C$1.95, or 4.2 percent, to C$48.95 after it said its first-quarter profit surged as production jumped and the company’s refining operations performed well.

Weakness in oil and gold also weighed on the market, said Adrian Mastracci, investment counsel and president at KCM Wealth Management, in Vancouver, British Columbia.

“Those two certainly count for a good chunk of it,” he said.

Materials issue fell 0.2 percent despite strength from Alcan, which jumped C$2.46, or four percent, to C$63.80 after it reported a sharp rise in first-quarter profit, beating analysts’ expectations.

In the oil patch, energy shares were flat despite a fall in the price of US oil, down $1.31 to $64.58 a barrel on a bout of profit-taking after concerns about Nigerian supplies sent prices higher.