[friendzis]

Why would it happen? Competition is only supposed to drive prices down in free markets with relatively high elasticity. When producer/retailer sees that inflation is perfectly good excuse to raise prices now to account for future cost increases without sacrificing demand, they do exactly that. And why would you raise prices by lower magnitude or even lower them when elasticity is so low that lowering prices literally hurts profits?

Smart people can argue why elasticities are so low across the market, but IMO low elasticity is one of the major drivers behind equilibrium working a little bit differently than you would expect from high school level economics.