"The critical question to ask in terms of the level and eventual upward guide path of the policy rate is how high a rate can a levered economy stand? How much wood can a woodchuck chuck? How high a rate can a homebuyer handle?" he said.
Gross pointed out that an increase of 125 basis points in the 30-year mortgage rate over the past six to 12 months seems to have stopped housing starts and ended mortgage refinancings.
As a result, he said investors should expect the Fed to keep its benchmark rate low for a very long time.
The "Fed funds will then stay lower than expected for a long, long time," he said. "Right now the market [and the Fed forecasts] expects Fed funds to be 1 percent higher by late 2015 and 1 percent higher still by December 2016. Bet against that."
Later appearing on CNBC's "Street Signs," Gross was asked to comment on Brazil's economy. Though the emerging market had been a growth engine in recent years, it now faces a possible credit crisis following news that OGX Petróleo e Gas Participações SA missed a $45 million interest payment Tuesday. The miss moves the debt-laden Brazilian oil producer closer to the largest Latin American corporate debt default ever.
To Gross, Brazil has myriad problems, from high pension payments to infrastructure issues.
"It's not the paradise that investors thought two or three years ago and the future place of the World Cup and the Olympics," he said.
—By CNBC's Deep Bagchee. Follow him on Twitter: @DeepBagchee
CNBC's Drew Sandholm contributed to this report. Follow him on Twitter @DrewSandholm