Gerrard and Torres have now scored 44 goals between them this season and a remarkable nine in their last five games together.
Keegan, despite his own side's desperate form, could only be impressed with the Gerrard-Torres combination.
He said: "You are only seeing the start of it at the moment, but what you are seeing if you are Rafa Benitez or a Liverpool fan is something that makes you go 'Wow.'
"It's not what it is now but what it could be in the future that must frighten teams.
"Liverpool have the players who can really hurt you and, in Gerrard and Torres, they certainly had that. They are building a good partnership, realising the strengths of each other, and they are exploiting that on the pitch.
"But you must put it into perspective. If you are spending over £20m for a striker then you would expect him to be good, top class. It's not a gamble. Not like when Liverpool bought me from Scunthorpe for £33,000, that's a gamble.
"But they have spent £20m, and Torres has been playing at this level for a few years in Spain and for their national side. It is not a surprise. He is a very good player. But the partnership with Gerrard is a combination that can only get better."
Benitez, not surprisingly, wanted to wrap Torres and Gerrard in cotton wool once Newcastle had been put to the sword.
He said: "The understanding between Torres and Gerrard is really good, the goals they contrived together killed the game.
"If teams give them space and time, when they have to attack themselves, they can be very dangerous. If a team is losing they have to come out and attack, and that is when the pair of them be really kill the defenders.
"They are clever players, their movement is good and they have such quality. They seem to understand where each other is and where they will run, defenders cannot stop them.
"They have such confidence now, they believe they will score in every game. And when the rest of the team is also playing well, that is very positive.
"It is important not to concede an early goal in Milan, but we will obviously try to score as the key to progress is to score one ourselves."