The U.S. Federal Reserve will likely raise rates by 25 basis point at its next rate-setting meeting next week, but further signs of financial sector instability could lead to a "hawkish" pause, said Daniel Ivascyn, chief investment officer at Pacific Investment Management Co (PIMCO).

"They're going to be watching signs of more instability across the financial sector very carefully," Ivascyn told Reuters. "There certainly are scenarios where they pause, it'll likely be a hawkish pause if it's a pause, but our current thinking is they go 25."

Fed funds futures on Thursday priced in a 25-basis point hike by the Fed at next week's meeting, with inflation concerns outweighing ongoing investor fears of a global banking crisis.