nginx proxy redirect with fastapi routers - nginx

Question

I am attempting to develop a web app with nginx and fastapi and react. These are all new to me.
Regarding the fastapi, I have a main FastAPI that has a login route. I have added additional routes with APIRouter class and FastAPI.include_router method. I refered to this documentation
Development setup
fastapi runs on port 8000 with uvicorn
react frontend runs on port 5000 with npm start
axios base url is localhost:8000
Everything works as expected and the axios calls return correct response.
Production setup
fastapi runs on port 80 with gunicorn
frontend built with npm build
axios base url is localhost
all request handled with nginx in frontend
I based the following nginx conf file on this documentation
# conf file for server
# proxy pass for api requests
upstream api {
server backend;
}
# main server for app
server {
listen 80;
server_name localhost;
access_log /var/log/nginx/frontend;
error_log /var/log/nginx/frontend;
location / {
root /usr/share/nginx/html;
index index.html index.htm;
try_files $uri $uri/ /index.html;
}
location /api {
proxy_set_header X-Forwarded-For $proxy_add_x_forwarded_for;
proxy_set_header X-Forwarded-Proto $scheme;
proxy_set_header X-Forwarded-Host $server_name;
proxy_redirect off;
proxy_pass http://api;
}
#error_page 404 /404.html;
# redirect server error pages to the static page /50x.html
#
error_page 500 502 503 504 /50x.html;
location = /50x.html {
root /usr/share/nginx/html;
}
}
Note that I am using docker compose and have a backend service and a frontend service.
With this configuration the login route works correctly, but the routes added via FastAPI.include_router return HTTP 307 redirect and the response header shows requested url as http://api/api/path/to/route instead of http://localhost/api/path/to/route. So it appears that nginx successfully proxy passes requests for a route directly in the main fastapi app module but redirects to the wrong url for requests to routes added with app.include_router. According to this reference, I should have proxy_redirect off; in the /api location block, but if I remove this line, then nginx redirects the request and returns the correct response.
question
why is nginx redirecting the request even when I include proxy_redirect off; in the conf file.
why does the redirect not return the correct response unless I remove proxy_redirect off;