A chart showing the U.S. 10-year treasury yield below 2% as of 11:49 p.m. ET Wednesday.

The policymaking committee of the Fed also dropped the word "patient" from its statement, a sign interpreted by some investors as a hint that the central bank hasn't abandoned the idea of a rate cut in 2019. The Fed tweaked its statement to acknowledge that inflation is "running below" its 2% objective.

Though the central bank maintained the target overnight lending rate , that decision was accompanied by a growing number of officials open to one rate cut by the end of 2019 with eight members in favor. However, the consensus still didn't expect a reduction until 2020 at the earliest.

The yield on the benchmark 10-year Treasury note fell below 2% for the first time since November 2016 on Wednesday — breaching a key psychological level — after the Federal Reserve struck a more dovish tone in its June policy statement and Chair Jerome Powell said that the case for easier monetary policy had strengthened.

At around 11:58 p.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, declined below 2% to 1.9821% — around its lowest levels since November 2016. The yield on the 2-year slipped to 1.7209%, its lowest level since 2017. The 3-month Treasury bill yield ticked lower to 2.175%, as of 7:30 p.m. ET.

While stock investors and home buyers may initially cheer the drop in the benchmark for corporate bond and mortgage rates, the return to levels not seen in more than two years raises serious questions about the state of the economy.

Softer economic gauges like May's anemic jobs report — which showed that the U.S. economy added just 75,000 positions — and a lackluster consumer pricing print suggested to economists and fixed-income traders earlier this month that the central bank may have to assure markets of its willingness to step in if GDP growth decelerates.

Speaking to reporters after the central bank meeting, Powell said policymakers are worried about certain economic data and see an improving case for easier policy.

"Overall, our policy discussion focused on the appropriate response to the uncertain environment," he said. "Many participants now see the case for somewhat more accommodative policy has strengthened," Powell said.

Traders are now pricing in a more than 80% chance of a rate cut in July and 70% probability of another reduction in September, according to the CME Group's FedWatch tool.

"It was largely what the market was looking for: I don't think they went too far as to spook the market in any way," said Tom Garretson, a fixed-income strategist at RBC. "Seeing that eight [officials] are seeing a rate cut this year was dovish."

"This is mostly an inflation story," he added. "If you look at GDP forecast for 2020 they're up to 2% from 1.9% ... even if they were worried about tariffs, it didn't show up in their forecast."

The Fed has in recent months been grappling with a consistent shortfall in inflation relative to its self-imposed 2% target. The Fed's preferred inflation gauge, the core personal consumption expenditures (PCE) price index, increased 1.6% in the year to April after gaining 1.5% in March.

Treasury inflation-protected securities — bonds whose payouts are indexed to consumer prices — show that price growth expectations have slid in recent months. Inflation is a threat to the value of a bond's fixed coupon and principal payments.

Wednesday's decision from the Federal Open Market Committee came after President Donald Trump's repeated criticism of the Fed and Jerome Powell specifically for raising rates and tightening monetary conditions over the last year. Trump, who sees recent Fed policy as damaging to American markets and undermining his bargaining position in trade talks, has broken with tradition in his frequent and vocal criticism of the central bank.

Asked Tuesday whether he wants to remove Powell as Fed Chair, Trump said "Let's see what he does." Trump's comments came after Bloomberg News reported Tuesday morning that the White House had looked into demoting Powell in February.

Trump also said Tuesday he will be having an "extended meeting" next week with the Chinese leader Xi Jinping at the G-20 meeting in Japan.

Meanwhile, European Central Bank President Mario Draghi said Tuesday that the central bank may need to ease monetary policy in the coming months if inflation doesn't bounce back toward its target.

"In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required," Draghi said.

— CNBC's Eustance Huang, John Melloy and Jeff Cox contributed reporting.