The Federal Open Market Committee sets official U.S. interest rates. It is a 12-member committee of the Federal Reserve made up of the seven members of the Fed's Board of Governors and five of the presidents of the 12 regional Federal Reserve Banks. The president of the New York Federal Reserve is a permanent member; the presidents of the other Reserve Banks serve rotating one-year terms. It is headed by the Chairman of the Federal Reserve Board. The FOMC holds eight scheduled meetings each year and can hold non-scheduled meetings. It decides on an appropriate level for the discount rate and the fed funds target rate at each meeting. The Fed directly controls the discount rate, the rate at which it charges banks for overnight loans, but this has little impact on banks' activities as these funds are available elsewhere. Of greater importance is federal funds rate, the rate which banks lend funds to each other to maintain their reserve requirements with the Fed. The Fed does not control it directly as it does the discount rate, but indirectly through its open market operations, its sales and purchases of U.S. government debt to and from banks.

See also: http://www.federalreserve.gov/monetarypolicy/fomc.htm