The Foxes host the runaway leaders on Boxing Day aiming to close the 10-point gap.
Brendan Rodgers’ men, second in the Premier League, suffered their first defeat since losing at Anfield in October after they were beaten 3-1 at Manchester City on Saturday.
But Vardy insisted their belief remains as they look to hit back following defeat at the Etihad.
“I think we were pretty confident in our ability, but we knew that we had to show that game by game,” said the Premier League’s 17-goal top scorer. “I think at the minute we’re where we deserve to be.
“We just have to go into it the same as any other game. Like I said, we know we’ve got a lot of talent and a lot of ability and we know that we can hurt teams when we’re playing at our best.
“We’re a bit disappointed with the result against Man City, but it’s all about dusting ourselves off now and getting ready for the Liverpool game.”
Liverpool have returned from Qatar after winning the World Club Cup with a 1-0 victory over Flamengo on Saturday.
They also beat Monterrey in their semi-final in Doha with their trip meaning they have a game in hand on their title rivals.
Jurgen Klopp’s side have not lost in the league since January 3 and Vardy dismissed any suggestions their travels to the Middle East will have a negative impact.
“I don’t think that comes into it at all,” he told the club’s official site.
“Every professional footballer is obviously prepared to play games no matter where they are.
“They’ve been on a plane, and I’m sure the recovery would have been done on the plane, so they’ll be fresh and ready to go. We know we have to be at our best.”