By Jason Douglas and Nicholas Winning

LONDON -- Bank of England Gov. Mark Carney plans to serve an extra year as head of the British central bank to see the U.K. beyond its exit from the European Union, the BOE said.

In a letter to Treasury chief Philip Hammond on Monday, Mr. Carney said that he would be "honored" to serve as governor until June 2019 -- a year longer than he initially pledged to serve as central bank governor but still two years short of a full eight-year term.

The decision means he will likely stay through the completion of Britain's negotiations to exit from the EU. Prime Minister Theresa May has said she will formally trigger Article 50 of the EU's Lisbon Treaty by the end of March, opening a two-year window for negotiations.

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

Speculation over Mr. Carney's future had reached fever-pitch in the U.K. in recent days. The BOE chief has faced criticism from some euroskeptics for what they consider his scaremongering about the potential costs of leaving the EU. But the central banker's supporters say his strong response to the June referendum result avoided market panic that could have endangered the world economy.

Mr. Carney's announcement came hours after Mrs. May affirmed her support of a longer term for the BOE chief, in a rebuke to Brexit hard-liners who wanted him out sooner. Asked if the prime minister thought Mr. Carney was the best man for the job, Mrs. May's spokeswoman said: "Absolutely."

Still, signs of possible tensions with Mrs. May surfaced after her speech at the Conservatives' party conference in early October, in which she criticized the BOE's easy-money policies. Treasury chief Philip Hammond later clarified that the government had no plans to change the BOE's inflation-fighting remit or dilute its cherished independence.

Mr. Carney, a Canadian, had told British lawmakers last week that he was still reflecting on his decision, which he called "entirely personal" because of the potential disruption to his family of serving a longer term.

The British pound slipped 0.2% against the dollar at $1.2167 early Monday following media reports over the weekend speculating on Mr. Carney's plans. But the currency reversed those losses later in the day and rose even higher after Mr. Carney's announcement, trading up 0.4% at $1.2234.

Mr. Carney took the job in 2013 on the understanding he would serve five years of the standard eight-year term for a BOE governor. He opened the door to serving the full term -- until 2021 -- late last year, but recent clashes with Brexit-supporting lawmakers fueled speculation he might leave in mid-2018 after all.

Downing Street said Mrs. May and Mr. Carney spoke Monday in a meeting that had been scheduled for some time. "The prime minister has always had a good working relationship with the governor of the Bank of England and intends to continue that," the spokeswoman said.

Mr. Carney and his colleagues will decide whether they need to ease policy further on Thursday, after cutting the benchmark interest rate to a new low of 0.25% and reviving a crisis-era bond-buying program in August to cushion the economy from a potential Brexit shock.

Martin Sorrell, chief executive of WPP PLC, which owns such advertising agencies as Ogilvy & Mather and Grey, said he hoped Mr. Carney would stay. "He stabilized things at a very difficult time," Mr. Sorrell said in an interview. "They were worried and concerned, but they moved very quickly to deal with it."

--Riva Gold in London and Nick Kostov in Paris contributed to this article.

Write to Jason Douglas at jason.douglas@wsj.com and Nicholas Winning at nick.winning@wsj.com

(END) Dow Jones Newswires

October 31, 2016 15:06 ET (19:06 GMT)

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