The Leeds United goalkeeper made his international debut last month.
Peacock-Farrell, who has established himself as Leeds' first choice since the turn of the year, was involved in a mix-up with Craig Cathcart, the Watford defender, which allowed Bosnia to score their winning goal in last month's meeting in Belfast.
But speaking to the Belfast Telegraph, O'Neill insisted there is not much more the youngster could have done.
And, as one of the two called up goalkeepers playing regular football this season, Peacock-Farrell looks set to keep his place for the upcoming games against Austria and Bosnia.
"When you put your goalkeeper in, you have to look at if they are playing, that’s a big part of it because a lot of goalkeeping is decision making,” said the Northern Ireland manager.
“Michael (McGovern)'s game time is limited to the cup competitions. Trevor (Carson) is playing at Motherwell and Bailey is playing at Leeds.
“Bailey and I talked about the second goal against Bosnia and personally I don’t think he could do a whole lot more with it but it probably wasn’t the start he wanted as a young goalkeeper.
“Since then he’s gone back to his club and started every game. “I think we are in a good place with the goalkeepers. Obviously Michael’s situation is frustrating for him, but we also have younger goalkeepers like Conor Hazard and Conor Mitchell and they will push through in the next 12 to 18 months.”
Signed upon his release by Middlesbrough's youth set up in 2013, Peacock-Farrell finally seized his opportunity after injuries to Felix Wiedwald and Andy Lonergan last season.
But despite the summer capture of Jamal Blackman on loan from Chelsea, the 21-year-old has retained his place under the new Leeds manager, Marcelo Bielsa.
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