SANTIAGO, Jan 8 (Reuters) - Chile's annual inflation ended 2023 at its lowest level since June 2021, official data showed on Monday, edging closer to the central bank's target and allowing the monetary authority to keep lowering interest rates.

Consumer prices in the Andean country rose 3.9% in the 12 months through December, statistics agency INE said, still above the 3% official target but down from 4.8% in November and well below the nearly three-decade high 12.8% seen at the end of 2022.

Prices in December alone slipped 0.5% from the month before, INE added, below all estimates in a Reuters poll of economists that had a median forecast of a 0.1% fall.

Chile's economy had a rapid post-pandemic recovery, which led to high inflation and subsequent aggressive monetary tightening.

The country's central bank raised interest rates by 975 basis points between 2021 and late 2022, and held them at a cycle-high 11.25% for nine months before kicking off monetary easing last July as inflation cooled.

It has so far reduced borrowing costs by a total 300 basis points and flagged more cuts as it sees inflation "clearly" converging to its target, which it expects to be reached in the second half of 2024.

"The rapid disinflation picture will allow the central bank to accelerate the pace of monetary easing over its coming meetings," Andres Abadia, Pantheon Macroeconomics' chief economist for Latin America, said in a note, adding policymakers now had "ample room for maneuver."

The December inflation drop was mainly driven by lower food and leisure prices, according to INE, which noted that 10 of the 12 groups surveyed posted monthly decreases, while only one - restaurants and hotels - saw prices rise.

Scotiabank economist Jorge Selaive said the central bank should consider cutting rates between 75 and 125 basis points at its next monetary policy meeting on Jan. 30-31, with the data backing that view.

"This only confirms something we have been saying for a long time: inflation is falling and monetary policy is behind the curve," he said.

In December, the central bank weighed cuts of either 50 basis points or 75 basis points, but went for the deeper one citing the improving inflation scenario. (Reporting by Gabriel Araujo and Natalia Ramos; Editing by Steven Grattan and Tomasz Janowski)