Mr Carney is currently working as governor of the Canadian central bank and will hold the position, which he will take up in July 2013, for five years.
It had previously been assumed that deputy governor Paul Tucker would take over and today's appointment was a shock choice.
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Mr Carney will be responsible for keeping prices under control, setting interest rates and keeping the UK economy safe.
Mr Osborne said: "Mark Carney is an outstanding candidate to be Governor of the Bank of England and help steer Britain through these difficult times. He is quite simply the best, most experienced and most qualified person in the world to do the job.
"He has done a brilliant job for the Canadian economy as its central bank governor, avoiding big bail outs and securing growth. 
"Along with its central role in monetary policy, this Government has put the Bank of England back in charge of regulating the financial system so that we don't repeat the same mistakes of the last decade. Mark Carney is the perfect candidate to take charge of the Bank as it takes on these vital new responsibilities. He will bring strong leadership and a fresh new perspective."
The Bank will have more regulatory powers next year following the split of financial services regulation into the Financial Policy Committee, Prudential Regulatory Authority and Financial Conduct Authority.
Mr Osborne said Mr Carney would apply for British citizenship, although it was not required by the role. 


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