City returned to action following the international break with a superb 3-0 win away at Carragher's former side over the weekend.
The City fans were jubilant in the away end at Anfield, in their first game since being found guilty of breaching Premier League financial regulations.
City's appeal over the decision is ongoing, with a final call expected over what happens next before the end of 2026, and Carragher stated City and Arsenal are still the best two teams in England 'by a mile' - but he's not clear over a title run for Enzo Maresca.
"We need a resolution as soon as possible because we’re watching a game and not sure what it actually means going forward, if it even makes any difference to Man City, or the title race with Arsenal.
"They’re the two best teams by a mile, we know that, and no on is going to compete with them for the title.
"But, I think it’s hard to include City in that, at this early stage.
"From City’s point of view, they’ve gone and won at two of their toughest venues, Anfield and Old Trafford, and won in very difficult circumstances."