Retail sales surpassed Wall Street's estimates in August, as investors keep a close eye on any signs of a slowdown in consumer spending. The data comes as the Federal Reserve's two day policy meeting kicks off in Washington with the central bank widely expected to cut interest rates as economic growth data slows and inflation lessens.

Retail sales rose 0.1% in August. Economists had expected a 0.2% decrease in spending, according to Bloomberg data. Meanwhile, retail sales in July were revised to a 1.1% increase, from a prior reading that showed sales increased by 1% in the month, according to Census Bureau data.

August sales, excluding auto and gas, rose 0.2%, below consensus estimates for a 0.3% increase. The control group in Tuesday's release, which excludes several volatile categories and factors into the gross domestic product reading for the quarter, increased 0.3% in August, in line with estimates.

The release comes as investors widely expect the Fed will cut interest rates for the first time since 2020 when it's next policy decision is announced at 2 p.m. ET on Wednesday.

Markets have been debating how large of a cut the Fed will enact. As signs emerge of slowing in the labor market and inflation falls toward the Fed's 2% target, markets have shifted to price in a 50 basis point cut from the Fed.

Entering Tuesday's retail sales print markets were pricing in a 67% chance the Fed cuts interest rates by 50 basis points, compared to the 33% odds seen that the Fed opts for a smaller 25 basis point cut, per the CME FedWatch Tool.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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