UNWARRANTED "API Error: Rate limit reached" WARNING

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

When I use Windows + Cursor + Claude Code extension, extension always returns "API Error: Rate limit reached". However Claude Code in terminal works fine. Credentials show subscriptionType: max but extension still fails.

Steps already tried (credentials deleted, ide folder cleared, fresh login, extension reinstalled)

What Should Happen?

I should be able to use the Claude Code extension as usual since I have not hit my session or weekly limits

Error Messages/Logs

API Error: Rate limit reached

Steps to Reproduce

• No clear steps to reproduce the issue as it occured at a random prompt suddenly

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.68

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

PowerShell

Additional Information

_No response_