FILE PHOTO: Bank Indonesia's logo is seen at Bank Indonesia headquarters in Jakarta, Indonesia, September 2, 2020. REUTERS/Ajeng Dinar Ulfiana/File Photo

By Gayatri Suroyo and Stefanno Sulaiman

JAKARTA (Reuters) - Indonesia's central bank delivered another surprise interest rate cut on Wednesday, aiming to bolster economic growth even as investor concerns grow over the country's fiscal discipline.

Bank Indonesia trimmed the benchmark 7-day reverse repurchase rate by 25 basis points to 4.75%, its sixth cut since it kicked off an easing cycle in September last year and the lowest since late 2022. All 31 economists surveyed by Reuters had expected no change.

Governor Perry Warjiyo said the central bank would continue to assess room for further cuts, underscoring economists' expectations for more monetary loosening. BI has had to balance the need to keep the rupiah currency stable and to support growth during the easing cycle, Warjiyo said.

"Our economic growth is still below the national capacity so demand needs to be pushed," Warjiyo told an online press conference, adding BI has been "all out" to support economic growth while maintaining financial market stability.

Markets have been unsettled by two weeks of protests and unrest across many cities from late August and then last week's abrupt sacking of respected finance minister Sri Mulyani Indrawati.

There have also been concerns about the central bank's independence following a "burden sharing" deal that will see BI help fund state programmes. And parliament is discussing changes that could strengthen the requirement for BI to support growth and allow parliament to evaluate board members and recommend their removal to the president.

BI has now cut its main interest rate by a total of 150 basis points. It has also expanded liquidity in the financial system through its open market operations and bought government bonds in the secondary market.

The bank also cut its overnight deposit facility rate by 50 basis points and its lending facility rate by 25 basis points to 3.75% and 5.50%, respectively.

SIGNS OF SLOWDOWN

Southeast Asia's largest economy grew 5.1% in the second quarter from a year earlier, the fastest pace in two years, but new finance minister Purbaya Yudhi Sadewa has said there were signs of slowing in the third quarter.

Purbaya has criticised BI for keeping banking liquidity "dry", which has restricted bank lending, as he moved more than $12 billion of government funds from the central bank to commercial banks to be used for loans.

In an apparent response to that, Warjiyo said loan supply was available amid ample liquidity, but demand for borrowing has been weak as businesses were in wait-and-see mode.

Banks have undisbursed loans of 2,372 trillion rupiah ($144.41 billion), he said. Warjiyo also urged commercial banks to follow BI's lead in rate reduction, highlighting that lending rates have only fallen 7 basis points so far this year.

However, Warjiyo said he welcomed Purbaya's decision to move government funds, as well as the new $1 billion stimulus package for the fourth quarter, which he said could help bolster domestic demand.

"Policymakers likely bet on a re-widening in the ID-U.S. rate differential after the U.S. Fed's anticipated cut this week, providing more headroom to lower domestic rates in 4Q25," DBS economist Radhika Rao said.

"Markets will monitor developments on proposed plans to expand the central bank's mandate," she said.

The governor did not respond to questions on parliament's bill affecting BI.

($1 = 16,425.0000 rupiah)

(Reporting by Gayatri Suroyo, Stefanno Sulaiman and Fransiska Nangoy; Editing by John Mair and Jacqueline Wong)