Hodgson will welcome Sterling back into the England set-up next week, when he names an extended squad of 30 players to complete his preparations for the World Cup finals in Brazil.
He said: "People like him emerging and doing as well as he is in a top team puts a lot of pressure on everybody else, because if you can do it at the top of the table with Liverpool then you can do it in an England shirt as well.
"I remember managing the Under-21s [in August] and being very impressed with him there, but at a time when he still hadn't quite burst back into the Liverpool team. Since he has been back in the Liverpool team, his form seems to be going up and up and up. What it means is that we have competition in the wide areas."
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