Major credit markets worldwide remain frozen while U.S. Congress debates the Bush administration's $700-billion financial rescue package. VOA's Barry Wood has more.
 

Traders at the New York Stock Exchange, 02 Oct 2008

This time the Dow Industrials lost 348 points or more than three percent to 10,482, its lowest close in three years. Major markets are now down about 25 percent this year. European markets Thursday were also off sharply. As gloom sets in about the weak condition of the world economy, oil prices fell again, losing nearly five percent to under $94 a barrel.  

John Lonski, chief economist at Moody's Capital Markets in New York, expects the central bank to soon cut interest rates.

"All along, ever since early 2007, the much greater threat has been unprecedented home price deflation as opposed to a flaring up of energy prices," said John Lonski. "So I would expect that fairly soon the Fed will shift into a mode of aggressive rate cutting. We could very well find that within one month the fed funds [overnight rate] is down to one percent."

With the Senate having already approved the $700-billion financial rescue, markets are anticipating that the House of Representatives will reverse course and approve the measure, probably on Friday. Economist Lonski says the measure is not likely to have much immediate impact on credit markets.

"I think all it is going to do for the economy is prevent this current recession from becoming more severe," he said. "It is not going to be enough to prevent real gross domestic product from contracting over the next several quarters."

Lonski spoke on Marketwatch.com.

Financial markets anticipate that the US jobless rate will rise when the Labor Department reports Friday on the employment situation for September. A rise of 100,000 jobless is anticipated. The US jobless rate is 6.1 percent.