TSX falls ahead of Fed rate decision as inflation heats up

By Nikhil Sharma and Fergal Smith

(Reuters) -Canada's main stock index fell on Tuesday as domestic data showed inflation heating up and investors awaited an interest rate decision by the U.S. Federal Reserve.

The Toronto Stock Exchange's S&P/TSX composite index ended down 79.04 points, or 0.3%, at 24,706.07, after two straight days of gains.

U.S. stocks also fell. The Fed is expected to keep interest rates unchanged on Wednesday when it will present updated economic projections. Investors worry that the economy could suffer in a fast-moving trade war.

"It must be extremely difficult for central banks to set any kind of policy in this environment not knowing what the next day is going to bring in terms of new pronouncements," said Michael Sprung, president at Sprung Investment Management.

Canada's annual inflation rate rose to 2.6% in February - the first time in seven months that inflation has crossed above the Bank of Canada's 2% target.

There is a worry that the inflation numbers along with an uncertain trade environment means Canada could be "heading into an environment like stagflation," Sprung said.

The technology sector fell 1.9%, with shares of electronics equipment firm Celestica Inc down 4.5%.

Industrials lost 0.6% and financials ended 0.2% lower.

Definity Financial shares fell 3.3% after Swiss Re announced a sale of its 10.5% stake in the Canadian insurer.

The materials group, which includes metal mining shares, added 0.4% as copper prices rose and gold moved to a new record high.

(Reporting by Fergal Smith in Toronto and Nikhil Sharma in Bengaluru; Editing by Leroy Leo and Alistair Bell)