VS Code MCP Agent: Server stuck on "Waiting for server to respond to initialize request" with FastMCP

[sandipan1]

I am trying to use a custom FastMCP server as a backend for the VS Code MCP agent. The server starts successfully, and I can interact with it using the FastMCP Python client. However, when launched via the VS Code MCP agent (using the "servers" config in settings.json), the agent gets stuck on:

Waiting for server to respond to initialize request...

Here is the config

            "test_server": {
                "command": "/Users/sandipan/projects/AI/llm-agents/research_agent/.venv/bin/python",
                "args": [
                    "/Users/sandipan/projects/AI/llm-agents/research_agent/mcp-server-demo/simple_server.py"
                ],
                "env": { "PORT": "8800"}
            }

Here is simple_server.py

from fastmcp import FastMCP, Client
import asyncio
from typing import List
import logging
import os
mcp = FastMCP("test_server")

# mcp_with_instruction= FastMCP("DataAnalysis", instruction="This server provides data analysis tools.Call get_average() to analyse numberical data ")

print(type(mcp))
@mcp.tool()
def greet(name: str) -> str:
    return f"Hello, {name}!"

@mcp.tool()
def add(a: int, b: int) -> int:
    """Add two numbers"""
    return a + b

### Resources exposes data sources that client can read 
@mcp.resource("data://config")
def get_config() -> dict:
    """Provide configuration information"""
    return {
        "version": "1.0",
        "author": "x"
    }


if __name__ == "__main__": 
    logging.basicConfig(level=logging.INFO)
    logging.info(type(mcp))

    asyncio.run(mcp.run_sse_async(host="localhost", port=int(os.getenv("PORT", 8800)), log_level="debug"))