FLC SET WRONG ALTIMETER SETTING DSNDED BELOW ASSIGNED ALT.

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ACR X DSNDING FROM FL240 TO 17000 FT MSL AND THE ALTIMETER WAS VERY LOW; 29.34. WE WERE DEVIATING AROUND TSTM; IN THE CLR; PASSING 18500 FT WHEN WE WERE GIVEN A FREQ CHANGE AND ENCOUNTERED MODERATE TURB. I CALLED OUT THE ALTIMETER SETTING; NOTICED THAT THE CHANGE IN ALTIMETER COUPLED WITH OUR DSCNT RATE HAD SUDDENLY PUT US 500 FT ABOVE LEVEL OFF ALT. I CALLED '500 FT ABOVE' AND THEN CHANGED FREQ AND STARTED TO CHK IN WITH ZDC. IT WAS THEN I NOTICED MY ALTIMETER AT 16000 FT MSL AND THE CAPT'S WAS AT 17000 FT. HE HAD MISSET HIS ALTIMETER TO 30.34 AND INDICATED 17000 FT. I IMMEDIATELY TOLD HIM TO CLB. I CHKED IN STATING THAT WE WERE CLBING BACK UP TO 17000 FT. ATC ASKED WHAT OUR ALT WAS AND I AGAIN SAID WE WERE RETURNING TO 17000 FT. NOTHING; NO OTHER TARGETS WERE ON THE TCASII AND ZDC ASKED NO QUESTIONS; NOR MADE ANY FURTHER REMARKS ABOUT OUR ALT. A COMBINATION OF EXTREMELY LOW ALTIMETER SETTINGS; RADIO FREQ CHANGE; MODERATE TURB; AND MY NOT CHKING THE CORRECT ALTIMETER SETTING LEAD TO A SMOOTH; BUT LOW LEVEL OFF; BUT THE ALTDEV LASTED ONLY 30-45 SECONDS AND WE DISCOVERED THE ERROR BEFORE ATC WAS REQUIRED TO MAKE ANY CORRECTIONS.