Yoda is behind everything
The closest guess, as it turns out, is that it’s all a mind trick by Yoda (though it is also fairly accurate to say that it’s a vision).
Rebels Recon is a Youtube channel that features interviews with Lucasfilm employees who work on Star Wars: Rebels. According to Henry Gilroy, the co-executive producer:
Ultimately, the visions created in the Temple are a means of
communication for Yoda to instruct and teach these young Jedi. The
vision of the Grand Inquisitor is entirely motivated by Yoda, who’s basically letting Kanan know that he is a Jedi Knight.
In that sense, then Yoda is the one knighting Kanan. As to Yoda’s own beliefs about his authority, I think they likely align with those expressed by the vision of the Grand Inquisitor (as a Temple Guard):
TEMPLE GUARD: By the right of the Council, by the will of the Force, Kanan Jarrus,
you may rise.
KANAN: Wait, what does this mean?
TEMPLE GUARD: It means you are what I once
was. A knight of the Jedi Order.
Yoda was of course the Grand Master of the Jedi Council, and he more broadly viewed himself as invested by the Force.
As to how the Grand Inquisitor and other Temple Guards were able to hold off the other Inquisitors, it’s hard to say. Perhaps it was merely an illusion, or perhaps the power of the temple was able to give them some physicality.