Inhibitory neurons take on many forms and functions. How this diversity contributes to memory function is not completely known. Previous formal studies indicate inhibition differentiated by local and global connectivity in associative memory networks functions to rescale the level of retrieval of excitatory assemblies. However, such studies lack biological details such as a distinction between types of neurons (excitatory and inhibitory), unrealistic connection schemas, and non-sparse assemblies. In this study, we present a rate-based cortical model where neurons are distinguished (as excitatory, local inhibitory, or global inhibitory), connected more realistically, and where memory items correspond to sparse excitatory assemblies. We use this model to study how local-global inhibition balance can alter memory retrieval in associative memory structures, including naturalistic and artificial structures. Experimental studies have reported inhibitory neurons and their sub-types uniquely respond to specific stimuli and can form sophisticated, joint excitatory-inhibitory assemblies. Our model suggests such joint assemblies, as well as a distribution and rebalancing of overall inhibition between two inhibitory sub-populations – one connected to excitatory assemblies locally and the other connected globally – can quadruple the range of retrieval across related memories. We identify a possible functional role for local-global inhibitory balance to, in the context of choice or preference of relationships, permit and maintain a broader range of memory items when local inhibition is dominant and conversely consolidate and strengthen a smaller range of memory items when global inhibition is dominant. This model therefore highlights a biologically-plausible and behaviourally-useful function of inhibitory diversity in memory.