Pellegrini: Man City facing uphill challenge
A tight match at Anfield saw both sides create promising openings to take all three points, but it was Liverpool who found the quality in the final third to win 2-1.
Goals from Jordan Henderson and Philippe Coutinho either side of Edin Dzeko's 50th Premier League strike won it for the hosts, leaving City five points behind leaders Chelsea having played a game more.
"It is three points less with one game less," he told Sky Sports. "Of course it is difficult to reach the top of table if you lose three points.
"But we must keep going and try to return to our normal performance and see where it takes us."
The Chilean cited mistakes in possession as the main factor in City's downfall, something they need to address if they are to catch Jose Mourinho's side.
"It was a close game but Liverpool won because they scored two beautiful goals," he added. "But in the first half we lost too many balls, especially in the first 15 minutes.
"After that we equalised and then hit the post through Aguero. But in the second half we didn't arrive in their box so we tried to change our style of play.
"I'm concerned that we are losing the ball too much - pressure is a factor. There is much we must analyse to improve."