Brazil retail sales hit record but undershoot expectations in February??

SAO PAULO, April 15 - Brazil's retail sales volumes rose in February but fell short of market expectations, even as they reached a new record level, data from statistics agency IBGE showed on Wednesday, amid high interest rates.

* Sales increased 0.6% in February from the previous month, below the 1.0% growth forecast by economists in a Reuters poll.

* Four of the eight sectors surveyed posted monthly gains, IBGE said.

* On an annual basis, retail sales rose 0.2%, also missing expectations for a 1.2% increase in the Reuters poll.

* High borrowing costs have continued to weigh on consumption in Latin America's largest economy.

* The central bank last month began an easing cycle with a cautious 25-basis-point rate cut to 14.75%, following a prolonged period in which rates were held near a two-decade high to curb inflation.

* Underlying demand remains fragile, despite stabilization in activity, according to Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.

* "Tight credit conditions and still-elevated interest rates continue to weigh on durables, limiting the scope for a sustained recovery," he said. (Reporting by Isabel Teles, Editing by Louise Heavens)