Benitez takes his Newcastle side to Anfield on Boxing Day with the Reds four points clear of City, who lost 3-2 at home to Crystal Palace on Sunday, and top of the table – a game before the halfway stage.
Jurgen Klopp’s men finished fourth at the end of the last campaign, 25 points adrift of the champions, but the Spaniard is tipping them to make a better fist of it this time around.
Asked if they are title favourites, he said: “Still it’s too soon, but I think both teams are a little bit ahead of the others. I haven’t seen the Manchester City game, but nobody was expecting that.
“But as I’ve said before, Crystal Palace, the three up front, you can buy them for £50million, each one, so it sometimes can happen when teams have good players to play on the counter-attack.
“But still I can see Liverpool, I can see Manchester City ahead of the others. Liverpool are in form, they are doing really well and it will be a very difficult game for us.”
Benitez famously guided Liverpool to Champions League glory in 2005 courtesy of a remarkable fightback against AC Milan in the final in Istanbul, and he believes Klopp has a stronger squad at his disposal than he had at the time.
Asked if the current Liverpool side is the best since his, he replied: “It’s difficult to say ‘team’ because always in my head is that when we beat Real Madrid and Barcelona, there was a great team, but what I think is they have the best squad.
“When you spend money, you bring in better players – they have signed Fabinho, spent some money on (Naby) Keita, but they kept (Jordan) Henderson and they kept (Georginio) Wijnaldum, so you keep the good players and you bring in new players, so the squad is better.
“What does that mean? That in different competitions, different games, still you have a strong team on the pitch.”
The Magpies will arrive on Merseyside desperate to improve upon a tepid display in Saturday’s goalless home draw with lowly Fulham, which left them five points clear of the relegation zone.
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