The playmaker was dropped from the squad ahead of Heart of Midlothian’s pivotal Betfred Cup encounter with Dunfermline Athletic at Tynecastle.
Walker has been subject of much specualtion surrounding a potential move to Rangers with the player making it clear he has no intention of signing a new contract at the club.
Cathro told BT Sport that the speculation has affected the 24-year-old.
“It’s starting to affect his performance levels a bit”, he explained. “We reached today where we have players more deserving of a place in the squad and more deserving of a place in the team.
“For Jamie it is about us continuing to support him but also for him to respond properly to work his way back into the team.”
The Hearts head coach, however, confirmed that he is still part of first-team and has no bearing on his future.
“It doesn’t affect any of those things other than he has to respond properly and work hard with his team-mates every single day to get back into the team,” he said. “Jamie’s a very talented player, a player I am remarkably fond of but there are expectations on all of us and everyone needs to hit those levels.”