Carney to extend term as BoE governor to help an 'orderly' Brexit

Bank of England governor Mark Carney is to extend his term by one year to help secure an "orderly" exit from Europe.

But the decision to stay until June 2019 falls short of speculation that he would serve a full eight-year term until 2021.

Mr Carney said, in a letter to Chancellor Philip Hammond, that he was staying on beyond the initial five-year period he said he would serve.

His six-year tenure as governor will be the shortest since the 1960s.

Predecessor Mervyn King served for 10 years.

:: Carney's compromise shows governor's power

Mr Carney's announcement came hours after Prime Minister Theresa May backed him to extend his initial five-year term.

He said: "I would be honoured to extend my time of service as Governor for an additional year to the end of June 2019.

"By taking my term in office beyond the expected period of the Article 50 process (for Britain to leave the EU), this should help contribute to securing an orderly transition to the UK's new relationship with Europe."

The pound steadied at just over $1.22 against the US dollar, about half a cent up on the day.

Mr Carney, who earlier met Mrs May in Downing Street, had come under pressure from critics over his warnings before the EU referendum about the economic dangers of a Leave vote.

He has also felt the need to defend the Bank's independence from politicians, after a speech by Mrs May at the Conservative Party conference seen as critical of his use of low interest rates to boost the economy.

Mr Hammond said in a reply to Mr Carney that he was "very pleased" at Mr Carney's decision to stay on.

:: Governor's decision comes at key moment for Bank

Sir Martin Sorrell, boss of advertising giant WPP (Frankfurt: A1J2BZ - news) , told Sky News that a one-year extension for Mr Carney was "better than nothing" but it was a pity he would not serve his full term.

He said the governor may have been "a little bit bruised by the criticism that he was subjected to" in the wake of the Brexit vote.

Sir Martin defended Mr Carney's warnings over the economic impact of a Leave decision and the Bank's actions in cutting interest rates afterwards.

He also expressed some doubt over the governor's extension to June 2019 meaning that he would still be around by the completion of Article 50 talks to exit the EU.

Adam Marshall, director general of the British Chambers of Commerce, said firms would be reassured that speculation about Mr Carney's future had been put to rest.

"However, the Governor will still be leaving at a sensitive time for the economy - so businesses will want to see a clear and ordered transition plan," he added.

:: Governor's decision comes at a key moment for the Bank of England

Conservative MP Andrew Tyrie, chairman of the Treasury Select Committee, welcomed the "much-needed clarification" which he said the committee would scrutinise when the governor faces it in a fortnight.

Mr Carney will face questions over his decision before then when he presents the Bank's quarterly Inflation Report, alongside its decision on whether to cut interest rates further, later this week.