Safari Private Relay Issue

Device: MacBook Air M1 on Sonoma 14.2

Issue:

Having "Hide IP address from trackers and websites" (pic 2) selected in Safari settings under privacy, the privacy report on the Safari toolbar (pic 1) says that "Your IP address is not being hidden from websites you visit." Also, the Private Relay settings under System Settings report that the relay is turned off for Safari, even though it isn't true. By pressing "Turn On for Safari" button, "Hide IP address from trackers and websites" changes to "Hide IP address from trackers only" (pic 3) under Safari privacy settings. Please see attached screenshots for better understanding.

Steps taken: Basic troubleshooting like toggling the buttons on and off, and rebooting the MacBook didn't help.

Picture 1.

Picture 2.

Picture 3.