City’s title hopes are all but over – with leaders Chelsea 12 points ahead of them after winning at Aston Villa.
It is a humbling situation for City, who were tipped to challenge Chelsea this season having gone toe-to-toe with them last year, losing out only on goal difference.
Taylor said in September that City knew “what they needed to do to go to the next step” in order to win the WSL – but here they sit, miles off it.
Many factors have contributed, not least injuries to key players including Alex Greenwood, Vivianne Miedema, Khadija Shaw and Lauren Hemp at varying times this season, but City’s lack of progress is concerning.
This latest home defeat by Arsenal, two weeks after a shock defeat at Etihad Stadium by Manchester United, only emphasised their problems.
Individual errors, defensive frailty, an insistence on playing out from the back and, most importantly, failure to pick up points, has proven costly.
“Of course, yeah, it’s a blow. You don’t want to lose against teams you are competing with for those [top three] places,” said Taylor.
“But that’s our objective now, to be in the Champions League qualification places at the end of the season.
“We don’t want it to be the case. You saw fight in the team but there were too many errors and too many duels not won.”
With distractions off the pitch and performances not clicking on it, Taylor admitted confidence is hard to find.
Captain Laia Aleixandri was robbed of possession in the first minute as Mariona Caldentey put Arsenal ahead and goalkeeper Khiara Keating failed to get to the ball before Lotte Wubben-Moy as the Gunners went 2-0 up within eight minutes.
“Yeah, I think it affects the team and probably affected Laia a little bit because she got caught in that situation early on,” said Taylor.
“But if we are gaining some positives, and it’s difficult to pick them out, then the fight back was really good. We got back to 2-2 and even 3-3.
“There were a lot of things that weren’t right and certainly that start, going 2-0 down in eight minutes, is really difficult to deal with confidence-wise.”
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