The O2 sensor is reporting that the cat is not cleaning the exhaust gases as well as it should. Two possibilities: the cat performance is really reduced, or the O2 sensor is getting old and inaccurate. Out of the two, the O2 sensor usually dies first, it has a lot shorter lifespan than a catalytic converter. It could still be sending a signal, just not a correct signal or not fast enough.
I always recommend replacing the sensor first, then if the code returns later, we have a reason to suspect the catalytic converter.
Then when the converter needs to be replaced, it is common practice to replace the O2 sensor too. But by then, you will already have that new O2 sensor in there, so no need to replace it again.
This approach helps you in two ways. First, you start with the MUCH cheaper component. That may be ALL you needed. Then, if after a while you do need the cat replaced, your bill will be lower because you don't need the O2 replaced again. The overall cost of both is spread out to a longer period of time, most likely not hitting the same paycheck :)