Wolves impressed in their 4-3 defeat to City on Saturday and McCarthy is confident of Premier League survival.
“Of course we can stay up,” he proclaimed. “Without a doubt. We will.
“We are not far away from where we were last season in terms of points and games played.
“We just had a good run, are playing well and getting players back. If we get a few more back we will be OK.”
Wolves face Liverpool, Manchester United and Arsenal in three of their next four Premier League games.
But McCarthy admits the key for Premier League survival will be to get results against other struggling clubs.
“We are trying our best to do that,” he said.
“But I am glad we are raising our game against the big clubs as well. We don’t lie down and let them tickle our bellies.
“Manchester City couldn’t handle us playing two strikers against them.
“Their two centre-halves are used to playing against one. They get their big fag out and have a smoke because it is a piece of cake.
“This time it was different, which is why we are disappointed not to get the point we deserved.
“But if there is anything we can take away from this, it is that we have a fabulous team spirit. That will keep us up, no question.”