New DBT VS Code extension creates "dbt8999: Cannot combine non-exact versions: =1.5.1 and =1.7.0dbt(8999)" error

The problem I’m having

I have installed the dbt vs code extension in my dbt project which is linked to my dbt cloud project.
When hovering over the name of my dbt project it is returning the following error: dbt8999: Cannot combine non-exact versions: =1.5.1 and =1.7.0dbt(8999)
The same error is returned when trying to preview models. On top of that, the lineage is not loading.

The context of why I’m trying to do this

trying to run code inside vs code using the new dbt vs code extension

What I’ve already tried

The error indicates a packages related incompatibility, but when running my models on the dbt cloud interface, they execute without a problem, so I assume the problem is linked to the vs code extension since it only occurs when running models inside vs code.

Some example code or error messages

dbt --version
returns
dbt-fusion 2.0.0-beta.12
Inside my project.yaml I have set:
require-dbt-version: [">=1.0.0", "<3.0.0"]

Thanks.