Bank of Canada Governor Mark Carney is quickly establishing himself as the toughest central banker on the planet.

With his tone on policy rates in the face of slackening global demand, he stands in stark contrast to counterparts such as US Federal Reserve Chairman Ben Bernanke, who this week conceded during annual testimony before the US Congress that his institution stands ready to provide more stimulus to the economy should conditions warrant such action.

Mr. Carney, although he held his key interest rate steady at 1 percent on Tuesday, also reiterated the BoC’s bias in favor of tighter monetary policy over the forecast horizon as opposed to an even more accommodative stance.

Mr. Carney was the first central banker in the Group of Seven to hike rates after the global financial crisis, moving off the 0.25 percent target in the spring of 2010 with a 25 basis point increase.

The BoC overnight rate has been at 1 percent since September 2010, but Mr. Carney continues to make noises about increases rather than cuts, confounding doves who read his increasingly pessimistic statements about global economic conditions. His concern is primarily with Canada and domestic inflation.

“To the extent that the economic expansion continues and the current excess supply in the economy is gradually absorbed,” Mr. Carney said in his most recent rate announcement, echoing recent such statements, “some modest withdrawal of the present considerable monetary policy stimulus may become appropriate.”

The BoC acknowledged diminishing global activity, lower commodity prices, record-high household debt and slowing housing activity as potential drags on the economy. However, noting increasing consumption and business investment, the bank stated that “while global headwinds are restraining Canadian economic activity, domestic factors are expected to support growth in Canada.”

The central bank trimmed its growth expectations for the nation’s economy to 2.1 percent and 2.3 percent, in 2012 and 2013, respectively. But it also suggested the Canadian economy will reach full capacity in the second half of 2013.

Mr. Carney firmed his stance during a Jul. 18 press conference following release of the BoC’s Monetary Policy Report (MPR) for July 2012, noting, “We make monetary policy for conditions in Canada. Monetary policy is extremely accommodative, financial conditions are extremely accommodative.

“We’re in a situation where there’s a very small amount of excess capacity in this economy. Rates are at 1 percent. They’re very low. And we will continue to conduct policy consistent with our inflation target.”

Inflation-control targeting has been the cornerstone of monetary policy in Canada since its introduction in 1991. At present the target range is 1 percent to 3 percent, with the BoC’s monetary policy aimed at keeping inflation at the 2 percent midpoint.

Canadian inflation climbed in June from a two-year low in May, but the weaker-than-expected report looked unlikely to spur the Bank of Canada to act any time soon on its warning that it could raise interest rates.

Statistics Canada reported Friday that annual inflation rose to 1.5 percent in June from 1.2 percent in May, which was a two-year low and well below the BoC’s stated 2 percent target, as a decline in gasoline and natural gas prices partially offset higher prices for passenger vehicles and electricity. Core inflation, which strips out gasoline and seven other volatile items, came in at 2.0 percent from 1.8 percent in May.

Inflation averaged 1.6 percent in the second quarter, just below the BoC’s forecast, while the average core rate was right on the mark at 2.0 percent.

But Mr. Carney noted during the MPR press conference that Canada cannot “cut and paste” monetary policy from elsewhere. He suggested as well that, unlike its struggling peers, Canada will need higher interest rates as its domestic economy inches closer to full capacity faster than other G7 countries.

The BoC’s MPR, released Wednesday morning in Ottawa, a day after the central bank held the line on its target overnight interest rate, shed little more light on the move. The MPR is a quarterly publication where it discusses growth and inflation projections for Canada and how developments around the world affect both of those.

Reading this more detailed report, it’s clear where Mr. Carney’s hawkishness is coming from: Ultra-low rates have encouraged excessive borrowing.

The BoC does expect the Canadian economy to “grow at a pace roughly in line with its production potential” in the near term before accelerating in 2013. Expansion will be driven by growth in consumption and business investment, which in turn is will be rooted in the present accommodative domestic financial conditions.

At the same time, however, housing activity is expected to slow from record levels, and exports are forecast to remain below pre-Great Recession peak until early 2014, due to weakened demand from hobbled trading partners as well as the persistent strength of the Canadian dollar.

And the BoC’s outlook has weakened since its April MPR, though projections for household consumption and business investment are only “somewhat” lower. The Canadian economy will continue to operate with “a small amount of slack” a little longer than the BoC anticipated a few months ago.

The bottom line is the key inflation figure should remain below the target point through 2012 before returning to 2 percent in mid-2013.

In the MPR the BoC noted that despite steps taken in June to stem mortgage loan growth Canadian households will see their debt burden worsen further in coming months. The federal government tightened mortgage rules because of signs of “overbuilding” in the housing market.

The BoC said these would help make Canadian housing more sustainable but noted, “Despite the lower forecast for household spending … the bank continues to expect further increases in the household debt-to-income ratio in coming quarters.” The debt-to-income ratio of Canadian households reached an all-time high of 152 percent in the first quarter, as ultra-low borrowing costs lured more people into buying homes.

The BoC has identified household debt as the top domestic risk to the economy. It also noted that the pace of growth in household credit had slowed this year and that consumer spending would likely be weaker than it anticipated last quarter, as global economic troubles bite into incomes and wealth.

But housing investment remains robust due to construction of multi-family buildings and home renovations, and this is taking a toll on household finances: “While growth in household spending has been moderate in recent quarters, it has been disproportionately supported by housing investment, which is around historical highs and showing signs of overbuilding.”

The bank sees economic growth bottoming in the second quarter at an annualized 1.8 percent, down from its 2.5 percent projection in April. It sees growth of 2.0 percent and 2.3 percent in the third and fourth quarters, respectively.

The 2012 revisions largely reflect weaker-than-expected government spending, business investment and consumer spending while the outlook for net exports improved slightly.

The bank sees inflation sharply lower at 1.7 percent in the second quarter, 1.2 percent in the third and 1.6 percent in the fourth.

With the economy running at just half a percent below its production capacity–the speed at which it can grow without fueling inflation–Mr. Carney is prepared to raise rates before acceleration fires inflation past the target. “This projection includes a gradual reduction in monetary stimulus over the projection horizon, consistent with achieving the inflation target,” noted the MPR.

The Canadian dollar is still off its 2012 high of USD1.0199, established on Apr. 27, but has also bounced off its 2012 low of USD0.9606, established Jun. 1. As of Friday afternoon, Jul. 20, the loonie was worth USD0.9876, sliding in the last trading session of the week after three days of gains.

The BoC will make decision on its overnight rate target on Sept. 5, 2012.

The Roundup

Here are dates for the next release of quarterly numbers, with links to analysis of results for companies that have reported.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–Jul. 26 (confirmed)
• Artis REIT (TSX: AX-U, OTC: ARESF)–Aug. 8 (confirmed)
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–Aug. 8 (confirmed)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–Aug. 13 (estimate)
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPUF)–Aug. 8 (confirmed)
• Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF)–Aug. 8 (confirmed)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–Aug. 9 (confirmed)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–Aug. 8 (confirmed)
• Dundee REIT (TSX: D-U, OTC: DRETF)–Aug. 8 (confirmed)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–Aug. 8 (estimate)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–Aug. 8 (confirmed)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–Aug. 7 (confirmed)
• Just Energy Group Inc (TSX: JE, OTC: JUSTF)–Aug. 10 (estimate)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–Aug. 8 (confirmed)
• Northern Property REIT (TSX: NPR-U, OTC: NPRUF)–Aug. 14 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, NYSE: PBA)–Aug. 9 (confirmed)
• RioCan REIT (TSX: REI-U, OTC: RIOCF)–Aug. 10 (confirmed)
• Shaw Communications Inc (TSX: SJR/B, NYSE: SJR)–Jun. 28 (confirmed)
• Student Transportation Inc (TSX: STB, OTC: STUXF)–Sept. 21 (estimate)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–Jul. 27 (confirmed)

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN, OTC: ACAZF)–Jul. 31 (confirmed)
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–Aug. 13 (estimate)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–Aug. 3 (estimate)
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–Aug. 8 (confirmed)
• Colabor Group Inc (TSX: GCL, OTC: COLFF)–Jul. 20 Flash Alert
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–Aug. 10 (estimate)
• Extendicare REIT (TSX: EXE-U, OTC: EXETF)–Aug. 9 (confirmed)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–Aug. 3 (estimate)
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–Jul. 23 (confirmed)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–Aug. 3 (estimate)
• Pengrowth Energy Corp (TSX: PGF, NYSE: PGH)–Aug. 10 (confirmed)
• PetroBakken Energy Ltd (TSX: PBN, OTC: PBKEF)–Aug. 8 (estimate)
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–Aug. 10 (estimate)
• PHX Energy Services Corp (TSX: PHX, OTC: PHXHF)–Aug. 3 (estimate)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–Aug. 2 (confirmed)