Manchester City emerged victorious from a breathless encounter with Liverpool at the Etihad Stadium to ensure they propelled themselves above the Reds and just one point behind Premier League leaders Arsenal.

The Gunners had regained supremacy on Boxing Day with a 3-1 defeat of West Ham earlier in the afternoon and City's win enabled the north London club to close this chapter of the festive programme at the very top of the tree.

This fixture in Manchester offered a mouth-watering prospect given the glut of goals from both City and Liverpool this season and the match failed to disappoint as it ebbed and flowed from the duration.

Liverpool should have moved into the lead courtesy of Raheem Sterling but his effort was inexplicably ruled out for offside. The visitors, though, were able to avenge this injustice when they did take the advantage through Philippe Coutinho.

Luis Suarez offered an exquisite touch into the path of Sterling who, after skipping past Joe Hart, allowed Coutinho to finish the job having taken the ball too wide to do so himself.

Manchester City restored parity via their captain Vincent Kompany who pushed and shoved himself free from the clutches of Martin Skrtel to divert his header off the turf and into the back of the Liverpool net.

Liverpool had an opportunity to double their lead by Coutinho's shot was blocked by Joe Hart, and City found what was to be winner just moments before the half-time interval.

The Reds were caught out by another rapid City counter-attack and Jesus Navas provided the killer pass to set free self-styled beast Alvaro Negredo. The Spain international's finish, however, should have been dealt with but Simon Mignolet could only force the ball into his own net.

Liverpool should really have drawn level in the second period but were found wanting when the chances presented themselves, with Sterling's miss at the back post the most notable of failures from Brendan Rodgers' side.

City, though, were not content to settle for such a slender advantage and continued to press forward in hope of a third, but Liverpool were able to repel the most potent attack in the division.

Liverpool will argue they should have had a penalty in the closing stages after Joleon Lescott tugged on the shirt of Suarez, and the visitors will feel the pain of defeat is not one they should have experienced.

Manuel Pellegrini's side are the only of the 92 in England to have recorded victory in each of their home outings this season and this, the most crucial so far, reinforces their credentials as the most realistic challengers for the title.

City may not be top but the depths of talent at their disposal has seen them outlined as the favourites to lift the Premier League trophy come May. There are, however, only four points separating the top four teams and roles will continue to be reversed as the months progress.

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