Second, since its founding the Fed has been entrusted with the responsibility of helping to ensure the stability of the financial system. The Fed likewise has two broad sets of policy tools: It makes monetary policy, which today we think of primarily in terms of the setting of the overnight interest rate, the federal funds rate.
One simple approach is to estimate the difference between the observed long-term interest rate (e.g., the yield on 10-year sovereign bonds) and expected nominal GDP growth (or the sum of expected real economic growth and expected long-term inflation).