UPDATE 1-Indonesia c.bank surprises by hiking key rate 50 bps to defend rupiah

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* C.bank lifts key rate for 3rd time in 6 weeks

* Market had expected a hike of 25 bps

* Move shows 'front-loading' strategy - governor

* BI expects the rate hike to increase inflows

* Rupiah strengthens marginally after decision

JAKARTA, June 29 (Reuters) - Indonesia's central bank surprised the market on Friday by hiking its key rate 50 basis points, double the expected amount, ramping up its efforts to defend the volatile rupiah.

It was the third interest hike in six weeks.

Bank Indonesia (BI) hiked the 7-day reverse repo rate to 5.25 percent. Seventeen out of 23 economists polled by Reuters had predicted a 25 bps increase.

"The decision on interest rate is a continuation of BI's pre-emptive and front-loading (strategy) in keeping the competitiveness of the domestic financial market," Governor Perry Warjiyo told reporters.

The governor also said he expected the 50 bps increase "will attract inflows, especially in fixed income. The inflow through government bonds should raise dollar supply and support rupiah stability."

BI's deposit and lending facility rates were also raised by 50 bps, to 4.50 percent and 6.00 percent respectively.

The rate tightening is aimed at shoring up the rupiah , which briefly recovered to 13,830 rupiah per dollar following the second of two May rate hikes, then fell again.

On Friday, just before the BI decision, it was at 14,410 - a 2-1/2 year low, and the currency strengthened to 14,300 afterward.

The rupiah hurt by expectations of further Fed rate hikes and rising oil prices, plus worries about global trade and growth .

The currency is among the worst performers among Asian units this year, after the Indian rupee and Filipino peso, losing around 5.8 percent against the dollar.

In a bid to spur more lending for housing, BI announced on Friday it is easing downpayment requirements for mortgage loans. (Writing by Fransiska Nangoy; Editing by Ed Davies and Richard Borsuk)