When the label is resized as you change the font size, the SizeRequest and SizeAllocated events will fire. What you could do is set the font size, then in the SizeAllocated event for the label, set the font size again. You will clearly have to stop the loop at some point, I assume you would cease increasing the font size when your label dimensions outstrip those of the window or screen etc.
However, have you considering using Pango and a drawing area instead?
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