"I can tell the House today that the governor has agreed, despite various personal pressures to conclude his term in June, that he will continue until the end of January 2020 in order to help support continuity in our economy during this period".
Mr Hammond said he was "delighted" that Mr Carney would serve seven more months "to support a smooth exit from the European Union and provide vital stability for our economy".
The extension was agreed in an exchange of letters between the governor and the chancellor published this morning.
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Carney's credentials in providing stable leadership during the tumultuous market conditions that followed the shock Brexit vote confirm him as a steady hand at the tiller in times of stress.
"I fully recognise that during this critical period, it's important that everyone does everything they can to help with the transition of exiting the EU", Carney said.More news: The biggest announcements from Apple's iPhone Xs event
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In the months after Britain voted to leave the European Union, however, he committed to an additional year as governor, citing "the importance to the country of continuity during the UK's Article 50 negotiations".
Hammond has also revealed that deputy governor Sir John Cunliffe has been re-appointed to his role.
Last week Prime Minister Theresa May gave her support to Carney staying on in his role to ensure a "smooth Brexit" and an "effective transition" at the central bank. "I certainly can't make announcements on behalf of the government but I'll do whatever I can to support this process". The former Bank of Canada chief was appointed to the role in late 2012 after previously saying he wasn't interested in the job, and initially agreed to serve just five years of what is usually an eight-year term.
Carney has already extended his term once at the Bank in a move to ensure continuity through the Brexit negotiations.