1) Your temperature reading is much finer in scale than the target temperature can be, so it looks like the error is much larger than it is.
2) You're cooling, not heating, so temperatures can float upward on their own and cooling is what is bringing the temperature reading down.
I'd be curious to see the actual on/off time of your A/C versus the input reading. Are you using PID control at all or is this too large a system to control like that?