Pep Guardiola is a very tactical man and his ways are always different and one step ahead of others. Their defeat to Arsenal will not in anyway affect their fight for the title race. I fear that they may comeback stronger than before after this break. Manchester City are known to be persevered and won’t give up until their last game in the season. When the existing first XI players are now becoming weak or opponents begin to understand their style of play, they usually use their backup players to replace them and win games for them. Pep Guardiola is use to doing this and I expect him to do the same even now if he has no other option on how to penetrate and win matches in the coming features.
I also expect Manchester City to start a winning streak after the break. The loss to Arsenal was a significant loss for them, but it was a predictable one. After all, Manchester City only loses three or four games at most in a season and this was one of them. It's bad that they lost to their direct rivals, but they can make up for it by winning their other matches.
When things get tough, Pep's tactical genius shines through. They play especially well at the end of the season. By remaining very strong mentally, Manchester City establishes a psychological advantage over their rivals. If there is a good winning streak after the losses at the beginning of the league, it won't be that important.