Pimco expects the U.S. Federal Reserve to begin raising interest rates later this summer, most likely in September, which could be the start of a multiyear normalization process, Scott Mather, chief investment officer of the firm's U.S. core strategies, said in a report today.

"While the process will likely be slow compared to past rate hike cycles, if the Fed manages to stabilize inflation at its target of 2 percent, then the central bank should get to the neutral policy rate of 2 percent–2.5 percent within a couple of years," Mather said. The neutral rate is the point at which the rate is neither stimulative nor contractionary.

Mather, one of three co-managers of the flagship Pimco Total Return Fund, the second-largest bond fund in the world, said, "extraordinary policy response of the past few years could result in more inflation than expected."

Newport Beach, California-based Pimco, which oversees $1.59 trillion as of March 31, said it sees value in inflation-linked bonds, which are mispriced given the firm's view that inflation will be back to target levels "relatively quickly" and "may even exceed them for a few years."